The Global Competitiveness Report 2013–2014: Full
Data Edition is published by the World Economic Forum
within the framework of The Global Competitiveness and
Benchmarking Network.

World Economic Forum
Geneva

Professor Klaus Schwab
Executive Chairman

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,
photocopying, or otherwise without the prior permission of
the World Economic Forum.

We thank Hope Steele for her excellent editing work
and Neil Weinberg for his superb graphic design and
layout. We are grateful to Dimitri Kaskoutas and Edoardo
Campanella for their invaluable research assistance.
The terms country and nation as used in this Report do
not in all cases refer to a territorial entity that is a state
as understood by international law and practice. The
terms cover well-defined, geographically self-contained
economic areas that may not be states but for which
statistical data are maintained on a separate and
independent basis.

The World Economic Forum’s Global Competitiveness
and Benchmarking Network is pleased to acknowledge
and thank the following organizations as its valued
Partner Institutes, without which the realization of The
Global Competitiveness Report 2013–2014 would not
have been feasible:
Albania
Institute for Contemporary Studies (ISB)
Artan Hoxha, President
Elira Jorgoni, Senior Expert
Endrit Kapaj, Expert

Burkina Faso
lnstitut Supérieure des Sciences de la Population (ISSP),
University of Ouagadougou
Baya Banza, Director
Burundi
University Research Centre for Economic and Social
Development (CURDES), National University of Burundi
Dieudonné Gahungu, Director
Charles Kabwigiri, Dean
Gilbert Niyongabo, Head of Department, Faculty of
Economics and Management

Croatia
National Competitiveness Council
Jadranka Gable, Advisor
Kresimir Jurlin, Research Fellow
Cyprus
The European University
Bambos Papageorgiou, Head of Socioeconomic and
Academic Research

Georgia
Business Initiative for Reforms in Georgia
Tamara Janashia, Executive Director
Giga Makharadze, Founding Member of the Board of Directors
Mamuka Tsereteli, Founding Member of the Board of Directors

Jamaica
Mona School of Business & Management (MSBM), The
University of the West Indies
Patricia Douce, Project Administrator
William Lawrence, Director, Professional Services Unit
Paul Simmonds, Executive Director and Professor

Guyana
Institute of Development Studies, University of Guyana
Karen Pratt, Research Associate
Clive Thomas, Director
Haiti
Group Croissance SA
Jean-Hubert Legendre, Head of Administration and Finance
Kesner Pharel, Chief Executive Officer and Chairman

The Global Competitiveness Report 2013–2014 is
being released at a time when the world economy is
undergoing significant shifts. The global financial crisis
and the ensuing developments have heightened the role
of emerging economies in the global context. This has
accelerated the major economic transformations already
underway, which have fueled rapid growth and lifted
millions of people out of poverty. Yet, although the global
economy’s prospects are more positive than they were
when we released last year’s Report, growth has begun
to slow across many emerging economies, and advanced
economies in Europe and elsewhere continue to struggle.
In the current context, policymakers must avoid
complacency and press ahead with the structural
reforms and critical investments required to ensure that
their countries can provide a prosperous environment
and employment for their citizens. They must identify and
strengthen the transformative forces that will drive future
economic growth. Particularly important will be the ability
of economies to create new value-added products,
processes, and business models through innovation.
Going forward, this means that the traditional distinction
between countries being “developed” or “developing”
will become less relevant and we will instead differentiate
among countries based on whether they are “innovation
rich” or “innovation poor.” It is therefore vital that leaders
from business, government, and civil society work
collaboratively to create enabling environments to foster
innovation and, in particular, to create appropriate
educational systems.
For more than three decades, the World Economic
Forum has played a facilitating role in this process
by providing detailed assessments of the productive
potential of nations worldwide. The Report contributes
to an understanding of the key factors that determine
economic growth, helps to explain why some countries
are more successful than others in raising income
levels and providing opportunities for their respective
populations, and offers policymakers and business
leaders an important tool for formulating improved
economic policies and institutional reforms. Going
forward, the World Economic Forum will continue these
efforts by collecting and curating public-private practices
that have proven useful in increasing competitiveness in
countries around the world.

In addition, political leaders increasingly recognize
the importance of qualitative as well as quantitative
aspects of growth, integrating such concepts as social
and environmental sustainability into economic decision
making. To advance thinking on these issues, the
Forum has continued its research into how sustainability
relates to competitiveness and economic performance.
Chapter 1.2 of this Report presents our evolving analysis
of how country competitiveness can be assessed once
issues of social and environmental sustainability are
taken into account.
This year’s Report features a record number of
148 economies, and thus continues to be the most
comprehensive assessment of its kind. It contains a
detailed profile for each of the economies included in the
study, as well as an extensive section of data tables with
global rankings covering over 100 indicators. This Report
remains the flagship publication within the Forum’s Global
Competitiveness and Benchmarking Network, which
produces a number of related research studies aimed at
supporting countries in their transformation efforts.
The Global Competitiveness Report 2013–2014
could not have been put together without the thought
leadership of Professor Xavier Sala-i-Martín at Columbia
University, who has provided ongoing intellectual
support for our competitiveness research. Further,
this Report would have not been possible without the
commitment and enthusiasm of our network of over 160
Partner Institutes worldwide. The Partner Institutes are
instrumental in carrying out the Executive Opinion Survey
that provides the foundation data of this Report as well
as imparting the results of the Report at the national
level. We would also like to convey our sincere gratitude
to all the business executives around the world who took
the time to participate in our Executive Opinion Survey.
We are also grateful to the members of our Advisory
Board on Competitiveness and Sustainability, who
have provided their valuable time and knowledge to
help us develop the framework on sustainability and
competitiveness presented in this Report: James
Cameron, Chairman, Climate Change Capital; Dan Esty,
Commissioner, Connecticut Department of Energy
and Environmental Protection; Clément Gignac, Chief
Economist and Senior Vice-President, Industrial Alliance
Insurance and Financial Services; Jeni Klugman, Director

for Gender, The World Bank; Marc A. Levy, Deputy
Director, CIESIN, Columbia University; John McArthur,
Senior Fellow, United Nations Foundation; Kevin X.
Murphy, President and Chief Executive Officer, J.E.
Austin Associates Inc.; Mari Elka Pangestu, Minister
of Tourism and Creative Economy of Indonesia; Mark
Spelman, Global Head of Strategy, Accenture; and
Simon Zadek, Senior Visiting Fellow, Global Green
Growth Institute.
Appreciation also goes to Børge Brende, Managing
Director at the Forum, and Jennifer Blanke, Chief
Economist and Head of The Global Competitiveness and
Benchmarking Network, as well as team members Beñat
Bilbao-Osorio, Ciara Browne, Edoardo Campanella,
Gemma Corrigan, Roberto Crotti, Margareta Drzeniek
Hanouz, Thierry Geiger, Tania Gutknecht, Caroline Ko,
and Cecilia Serin.
By providing decision makers with a basis from
which to reinforce strengths and eliminate weaknesses,
we hope to make a contribution in the spirit of our
mission—committed to improving the state of the world.

At the time this Report is being released, the world
economy continues to emerge slowly from the most
serious economic crisis of the post–World War II
period—one that has deeply transformed the global
economy and highlighted the increasingly important
role that emerging markets and developing economies
play in the global economy. As advanced economies
are searching for ways to speed up their economic
engines, emerging and developing countries have been
important drivers of the global economic recovery.
As a result, the nature of the relationship between
advanced economies and emerging ones has evolved,
and emerging and developing countries have created
stronger ties among themselves. Among the advanced
economies, two patterns seem to emerge: the United
States, Canada, and Japan are expected to grow at a
gentle pace, while the prospects for the euro zone are
more uncertain, especially as tight credit conditions
continue to limit domestic demand. More generally, the
new global economic landscape raises questions as to
the very distinction between advanced and emerging
economies, particularly when it comes to growth and
competitiveness.
Against this background, the past year has seen
some progress in rebuilding global confidence, so
recovery looks more assured today than it did just one
year ago. Many of the tail risks that concerned us in
the last edition have not come to pass, in particular in
the United States, which did not fall off the “fiscal cliff”;
in Europe, where the breakup of the euro zone was
avoided and where sovereign bond differentials have
drastically narrowed; and in China, where fears of a hard
landing have receded for the time being.
Despite this more positive global outlook, some
uncertainty remains. In advanced economies, the
potential consequences of a tapering and eventual halt
of quantitative easing in the United States, the aggressive
yet still incomplete financial and structural measures
adopted in Japan, and the persistent unemployment
and economic recovery challenges in Europe are
factors that could put future economic performance at
risk. In emerging markets, it is uncertain how protests
in Brazil and Turkey, the credit crunch in China,
and the potentially volatile capital flows to emerging
and developing markets will affect growth in these
economies. And critical challenges remain: policymakers
around the globe need to ensure that public finances
are sustainable in the longer term, where the pains
of deleveraging will be particularly felt by advanced
economies.
Around the world, unemployment or the threat of it
remains one of the main challenges to long-term social
sustainability. Indeed, the experience of recent years has
underscored social sustainability as key to longer-term
competitiveness, and thus to sustainable growth. Against
this challenge, one of the elements gaining in importance

in fostering countries’ competitiveness is education.
A perception is growing that educational systems in
many countries could better respond to the needs of
labor markets, help economies to avoid skills gaps, and
ensure that adequately trained human capital is available
to support business activity as well as to develop
innovative capacity and entrepreneurship. It is therefore
to be expected that, over the coming years, a series of
major systemic reviews of educational frameworks at the
national level will be necessary in many countries across
all stages of development. Overall, although there are
indications that economic policies and measures are
shifting in the right direction, efforts must be sustained
in order to safeguard the progress achieved and to keep
the global economy on a sustainable growth path going
forward.
Encouraging, sustaining, and enhancing growth
will require decisive action by leaders in order to boost
their countries’ competitiveness and future economic
outlook. Reforms and the right set of investments to
enhance competitiveness will be crucial for the economic
transformations that can lead to sustained higher growth
over the longer term. It is therefore imperative that
competitiveness features high on the economic reform
agenda of both advanced and emerging and developing
economies.
For more than three decades, the World Economic
Forum’s annual Global Competitiveness Reports
have studied and benchmarked the many factors
underpinning national competitiveness. From the onset,
the goal has been to provide insight and stimulate
discussion among all stakeholders about the best
strategies and policies to help countries to overcome the
obstacles to improved competitiveness. In the current
challenging economic environment, our work is a critical
reminder of the importance of sound structural economic
fundamentals for sustained growth.
Since 2005, the World Economic Forum has
based its competitiveness analysis on the Global
Competitiveness Index (GCI), a comprehensive tool that
measures the microeconomic and macroeconomic
foundations of national competitiveness.1
More recently, in order to better place the discussion
of competitiveness in the societal and environmental
context, the World Economic Forum has begun exploring
the complex relationship between competitiveness
and sustainability as measured by its social and
environmental dimension. The work carried out to date
on these important aspects of human and economic
development is described in Chapter 1.2.
Going forward, the World Economic Forum will
further support countries in their quest for higher
competitiveness by compiling and publishing a
repository of public-private practices that countries have
implemented in order to improve their competitiveness.
Together with the Index results, these practices will

4 | The Global Competitiveness Report 2013–2014

inform a series of structured multi-stakeholder dialogues
(see Box 1) that will be piloted over the coming year. We
hope that this new initiative will support transformations
toward higher competitiveness at regional and national
levels.
THE 12 PILLARS OF COMPETITIVENESS
We define competitiveness as the set of institutions,
policies, and factors that determine the level of
productivity of a country. The level of productivity, in
turn, sets the level of prosperity that can be reached by
an economy. The productivity level also determines the
rates of return obtained by investments in an economy,
which in turn are the fundamental drivers of its growth
rates. In other words, a more competitive economy is
one that is likely to grow faster over time.
The concept of competitiveness thus involves static
and dynamic components. Although the productivity of
a country determines its ability to sustain a high level of
income, it is also one of the central determinants of its
returns on investment, which is one of the key factors
explaining an economy’s growth potential.
Many determinants drive productivity and
competitiveness. Understanding the factors behind
this process has occupied the minds of economists
for hundreds of years, engendering theories ranging
from Adam Smith’s focus on specialization and the
division of labor to neoclassical economists’ emphasis
on investment in physical capital and infrastructure,2
and, more recently, to interest in other mechanisms
such as education and training, technological progress,
macroeconomic stability, good governance, firm
sophistication, and market efficiency, among others.
While all of these factors are likely to be important for
competitiveness and growth, they are not mutually
exclusive—two or more of them can be significant at the
same time, and in fact that is what has been shown in
the economic literature.3
This open-endedness is captured within the GCI
by including a weighted average of many different
components, each measuring a different aspect of
competitiveness. These components are grouped into 12
pillars of competitiveness:
First pillar: Institutions
The institutional environment is determined by the legal
and administrative framework within which individuals,
firms, and governments interact to generate wealth. The
importance of a sound and fair institutional environment
has become all the more apparent during the recent
economic and financial crisis and is especially crucial
for further solidifying the fragile recovery, given the
increasing role played by the state at the international
level and for the economies of many countries.
The quality of institutions has a strong bearing on
competitiveness and growth.4 It influences investment

decisions and the organization of production and plays
a key role in the ways in which societies distribute the
benefits and bear the costs of development strategies
and policies. For example, owners of land, corporate
shares, or intellectual property are unwilling to invest in
the improvement and upkeep of their property if their
rights as owners are not protected.5
The role of institutions goes beyond the legal
framework. Government attitudes toward markets
and freedoms and the efficiency of its operations
are also very important: excessive bureaucracy and
red tape,6 overregulation, corruption, dishonesty in
dealing with public contracts, lack of transparency and
trustworthiness, inability to provide appropriate services
for the business sector, and political dependence of
the judicial system impose significant economic costs
to businesses and slow the process of economic
development.
In addition, the proper management of public
finances is also critical for ensuring trust in the national
business environment. Indicators capturing the quality
of government management of public finances are
therefore included here to complement the measures of
macroeconomic stability captured in pillar 3 below.
Although the economic literature has focused
mainly on public institutions, private institutions are
also an important element of the process of creating
wealth. The global financial crisis, along with numerous
corporate scandals, have highlighted the relevance of
accounting and reporting standards and transparency
for preventing fraud and mismanagement, ensuring good
governance, and maintaining investor and consumer
confidence. An economy is well served by businesses
that are run honestly, where managers abide by strong
ethical practices in their dealings with the government,
other firms, and the public at large.7 Private-sector
transparency is indispensable to business; it can be
brought about through the use of standards as well as
auditing and accounting practices that ensure access to
information in a timely manner.8
Second pillar: Infrastructure
Extensive and efficient infrastructure is critical for
ensuring the effective functioning of the economy, as
it is an important factor in determining the location of
economic activity and the kinds of activities or sectors
that can develop within a country. Well-developed
infrastructure reduces the effect of distance between
regions, integrating the national market and connecting it
at low cost to markets in other countries and regions. In
addition, the quality and extensiveness of infrastructure
networks significantly impact economic growth and
reduce income inequalities and poverty in a variety of
ways.9 A well-developed transport and communications
infrastructure network is a prerequisite for the access of

Box 1: The Competitiveness Lab and
Competitiveness Practices Repository
A country’s competitiveness is widely accepted as the
key driver for sustaining prosperity and raising the wellbeing of its citizens. Enhancing competitiveness is a
long-term process that requires improvement across
many areas as well as long-lasting commitments from
relevant stakeholders to mobilize resources, time, and
effort. Accordingly, to make the right decisions, these
stakeholders need information and data.
For more than 30 years, the World Economic Forum
has studied and benchmarked competitiveness. From
the outset, our goal has been to provide insight and
stimulate discussion among all stakeholders to determine
the best strategies, policies, and activities for overcoming
the obstacles to improving competitiveness. Against
this backdrop, the Forum is taking the next step and will
embark on two new initiatives—the Competitiveness
Lab and Competitiveness Practices Repository—to
orchestrate an informed multi-stakeholder process for
better understanding and shaping the competitiveness
agenda of a country or region. The Competitiveness
Lab will create a safe space for sustained dialogue in
order to encourage better decision making and to help
define an action plan with priorities that supports the
competitiveness transformation of a country or region.
As part of this initiative, and in order to provide
additional knowledge inputs into the dialogue, the Forum is
also building a repository of competitiveness practices.
Given the crucial importance of supporting the coordinated
efforts of different agents to improve competitiveness,
the Forum’s expertise in building public-private strategic
collaborations, and the relative knowledge gap in this area,
the repository will focus on providing information about
competitiveness-driven public-private collaborations.
The information covered in this repository will include
a definition of specific contexts and competitiveness
challenges that have been faced by a particular country
or region, a description of the actions that were adopted,
and the implementation process of those actions, including
the identification of key barriers and enablers that allow
the practice to succeed. The objective of compiling this
information is to support cross-country learning and to
help stakeholders better assess the possibility of scaling
up and replicating any specific practice in their own
country or region.

less-developed communities to core economic activities
and services.
Effective modes of transport—including quality
roads, railroads, ports, and air transport—enable
entrepreneurs to get their goods and services to
market in a secure and timely manner and facilitate
the movement of workers to the most suitable jobs.
Economies also depend on electricity supplies that are
free from interruptions and shortages so that businesses
and factories can work unimpeded. Finally, a solid
and extensive telecommunications network allows for
a rapid and free flow of information, which increases

overall economic efficiency by helping to ensure that
businesses can communicate and decisions are made
by economic actors taking into account all available
relevant information.
Third pillar: Macroeconomic environment
The stability of the macroeconomic environment is
important for business and, therefore, is significant for
the overall competitiveness of a country.10 Although
it is certainly true that macroeconomic stability alone
cannot increase the productivity of a nation, it is also
recognized that macroeconomic disarray harms the
economy, as we have seen in recent years, notably
in the European context. The government cannot
provide services efficiently if it has to make high-interest
payments on its past debts. Running fiscal deficits limits
the government’s future ability to react to business
cycles. Firms cannot operate efficiently when inflation
rates are out of hand. In sum, the economy cannot grow
in a sustainable manner unless the macro environment
is stable. Macroeconomic stability captured the attention
of the public most recently when some advanced
economies, notably the United States and some
European countries, needed to take urgent action to
prevent macroeconomic instability when their public debt
reached unsustainable levels in the wake of the global
financial crisis.
It is important to note that this pillar evaluates
the stability of the macroeconomic environment, so it
does not directly take into account the way in which
public accounts are managed by the government. This
qualitative dimension is captured in the institutions pillar
described above.
Fourth pillar: Health and primary education
A healthy workforce is vital to a country’s
competitiveness and productivity. Workers who are
ill cannot function to their potential and will be less
productive. Poor health leads to significant costs to
business, as sick workers are often absent or operate at
lower levels of efficiency. Investment in the provision of
health services is thus critical for clear economic, as well
as moral, considerations.11
In addition to health, this pillar takes into account
the quantity and quality of the basic education received
by the population, which is increasingly important
in today’s economy. Basic education increases the
efficiency of each individual worker. Moreover, often
workers who have received little formal education can
carry out only simple manual tasks and find it much
more difficult to adapt to more advanced production
processes and techniques, and therefore contribute less
to devising or executing innovations. In other words, lack
of basic education can become a constraint on business
development, with firms finding it difficult to move up the

6 | The Global Competitiveness Report 2013–2014

value chain by producing more sophisticated or valueintensive products.
Fifth pillar: Higher education and training
Quality higher education and training is crucial for
economies that want to move up the value chain beyond
simple production processes and products.12 Box 2
outlines the linkages between fostering cross-border
value chains and competitiveness in more detail. In
particular, today’s globalizing economy requires countries
to nurture pools of well-educated workers who are
able to perform complex tasks and adapt rapidly to
their changing environment and the evolving needs of
the production system. This pillar measures secondary
and tertiary enrollment rates as well as the quality of
education as evaluated by business leaders. The extent
of staff training is also taken into consideration because
of the importance of vocational and continuous on-thejob training—which is neglected in many economies—for
ensuring a constant upgrading of workers’ skills.
Sixth pillar: Goods market efficiency
Countries with efficient goods markets are well
positioned to produce the right mix of products and
services given their particular supply-and-demand
conditions, as well as to ensure that these goods can
be most effectively traded in the economy. Healthy
market competition, both domestic and foreign, is
important in driving market efficiency, and thus business
productivity, by ensuring that the most efficient firms,
producing goods demanded by the market, are those
that thrive. The best possible environment for the
exchange of goods requires a minimum of government
intervention that impedes business activity. For
example, competitiveness is hindered by distortionary or
burdensome taxes and by restrictive and discriminatory
rules on foreign direct investment (FDI)—which limit
foreign ownership—as well as on international trade. The
recent economic crisis has highlighted the high degree
of interdependence of economies worldwide and the
degree to which growth depends on open markets.
Protectionist measures are counterproductive as they
reduce aggregate economic activity.
Market efficiency also depends on demand
conditions such as customer orientation and buyer
sophistication. For cultural or historical reasons,
customers may be more demanding in some countries
than in others. This can create an important competitive
advantage, as it forces companies to be more innovative
and customer-oriented and thus imposes the discipline
necessary for efficiency to be achieved in the market.
Seventh pillar: Labor market efficiency
The efficiency and flexibility of the labor market are
critical for ensuring that workers are allocated to their
most effective use in the economy and provided with

Box 2: Benefiting from globalizing value chains by raising competitiveness
As the relevance of international value chains continues
to grow within the global economy, international trade is
increasingly taking place within the production networks of
multinational corporations. According to estimates from the
Organisation for Economic Co-operation and Development
(OECD), imported intermediate inputs account for about onequarter of OECD members’ exports. For China, this share is
about 30 percent; it is about twice that for India and Brazil.
From a national perspective, participation in value-chain
trade has many benefits. Beyond export revenue, these
include employment and indirect spillovers in areas such
as management, technical know-how, and access to new
technologies.
The rise of cross-border value chains has important
implications for countries’ economic and trade policies as well
as for development efforts. One consequence is that crossborder trade in goods has become increasingly intertwined
with trade in services and cross-border investment flows, as
well as with the international movement of labor. For countries
at more basic stages of development, the key question is not
so much how to enter the value chain at the lowest level, but
how to move up to more advanced steps of production. So
what can countries do to benefit from this changing pattern
of trade?
As intermediate products may cross borders many times
before being assembled into the final good, trade facilitation
and other measures that reduce the transaction costs of
trade—especially the cost of logistics—are key for production
location. Participating successfully in international value
chains requires ease in importing, which in many countries is
still constrained by tariffs and other, more practical barriers
such as customs procedures or high transport costs.

incentives to give their best effort in their jobs. Labor
markets must therefore have the flexibility to shift
workers from one economic activity to another rapidly
and at low cost, and to allow for wage fluctuations
without much social disruption.13 The importance of
the latter has been dramatically highlighted by events
in Arab countries, where rigid labor markets were an
important cause of high youth unemployment, sparking
social unrest in Tunisia that then spread across the
region. Youth unemployment is also high in a number of
European countries, where important barriers to entry
into the labor market remain in place.
Efficient labor markets must also ensure clear
strong incentives for employees and efforts to promote
meritocracy at the workplace, and they must provide
equity in the business environment between women and
men. Taken together these factors have a positive effect
on worker performance and the attractiveness of the
country for talent, two aspects that are growing more
important as talent shortages loom on the horizon.

Whether a country can participate in cross-border value
chains crucially depends on a number of factors that include
its productivity and, therefore, the factors that determine
competitiveness as captured by the Global Competitiveness
Index (GCI). Among these factors are the availability of
healthy and educated workforce, robust infrastructure, deep
penetration of information and communication technologies,
a solid and efficient institutional framework, and efficient labor
markets. Although all these factors are needed to enter the
value chain, they rise in importance as the country wishes to
move up. The higher a country moves up the value chain, the
greater the importance of efficiency enhancers and innovation
and sophistication factors.
A specific feature of value-added trade is its strong link
with services trade. Transactional services—such as logistics
to transport the good to destination or telecommunications
to stay in touch and obtain information—must be available
for a country to enter and move up the value chain. Making
these services available necessitates a dynamic and open
business environment that benefits from healthy levels of
domestic competition and openness to international trade and
investment, issues that are captured by the goods markets
efficiency pillar of the GCI.
Overall, from a national policy perspective, the fact that
most global trade is now increasingly taking place in value
chains strengthens the link between trade and competitiveness
policies and raises the stakes for competitiveness-enhancing
measures even further. Competitiveness-enhancing policies are
particularly important for countries to move up the value chain.
In other words, by implementing competitiveness-enhancing
policies, countries can reap higher benefits that will result in
economic development and employment opportunities.

Eighth pillar: Financial market development
The financial and economic crisis has highlighted the
central role of a sound and well-functioning financial
sector for economic activities. An efficient financial
sector allocates the resources saved by a nation’s
citizens, as well as those entering the economy from
abroad, to their most productive uses. It channels
resources to those entrepreneurial or investment projects
with the highest expected rates of return rather than
to the politically connected. A thorough and proper
assessment of risk is therefore a key ingredient of a
sound financial market.
Business investment is also critical to productivity.
Therefore economies require sophisticated financial
markets that can make capital available for private-sector
investment from such sources as loans from a sound
banking sector, well-regulated securities exchanges,
venture capital, and other financial products. In order to
fulfill all those functions, the banking sector needs to be
trustworthy and transparent, and—as has been made
so clear recently—financial markets need appropriate
regulation to protect investors and other actors in the
economy at large.

Ninth pillar: Technological readiness
In today’s globalized world, technology is increasingly
essential for firms to compete and prosper. The
technological readiness pillar measures the agility with
which an economy adopts existing technologies to
enhance the productivity of its industries, with specific
emphasis on its capacity to fully leverage information
and communication technologies (ICTs) in daily activities
and production processes for increased efficiency and
enabling innovation for competitiveness.14 ICTs have
evolved into the “general purpose technology” of our
time,15 given their critical spillovers to other economic
sectors and their role as industry-wide enabling
infrastructure. Therefore ICT access and usage are key
enablers of countries’ overall technological readiness.
Whether the technology used has or has not been
developed within national borders is irrelevant for its
ability to enhance productivity. The central point is that
the firms operating in the country need to have access
to advanced products and blueprints and the ability
to absorb and use them. Among the main sources of
foreign technology, FDI often plays a key role, especially
for countries at a less advanced stage of technological
development. It is important to note that, in this
context, the level of technology available to firms in a
country needs to be distinguished from the country’s
ability to conduct blue-sky research and develop new
technologies for innovation that expand the frontiers
of knowledge. That is why we separate technological
readiness from innovation, captured in the 12th pillar,
described below.
Tenth pillar: Market size
The size of the market affects productivity since large
markets allow firms to exploit economies of scale.
Traditionally, the markets available to firms have
been constrained by national borders. In the era of
globalization, international markets have become a
substitute for domestic markets, especially for small
countries. Vast empirical evidence shows that trade
openness is positively associated with growth. Even if
some recent research casts doubts on the robustness of
this relationship, there is a general sense that trade has
a positive effect on growth, especially for countries with
small domestic markets.16
Thus exports can be thought of as a substitute for
domestic demand in determining the size of the market
for the firms of a country.17 By including both domestic
and foreign markets in our measure of market size, we
give credit to export-driven economies and geographic
areas (such as the European Union) that are divided into
many countries but have a single common market.
Eleventh pillar: Business sophistication
There is no doubt that sophisticated business practices
are conducive to higher efficiency in the production of

8 | The Global Competitiveness Report 2013–2014

goods and services. Business sophistication concerns
two elements that are intricately linked: the quality of a
country’s overall business networks and the quality of
individual firms’ operations and strategies. These factors
are particularly important for countries at an advanced
stage of development when, to a large extent, the
more basic sources of productivity improvements have
been exhausted. The quality of a country’s business
networks and supporting industries, as measured by
the quantity and quality of local suppliers and the extent
of their interaction, is important for a variety of reasons.
When companies and suppliers from a particular
sector are interconnected in geographically proximate
groups, called clusters, efficiency is heightened, greater
opportunities for innovation in processes and products
are created, and barriers to entry for new firms are
reduced. Individual firms’ advanced operations and
strategies (branding, marketing, distribution, advanced
production processes, and the production of unique and
sophisticated products) spill over into the economy and
lead to sophisticated and modern business processes
across the country’s business sectors.
Twelfth pillar: Innovation
Innovation can emerge from new technological and nontechnological knowledge. Non-technological innovations
are closely related to the know-how, skills, and working
conditions that are embedded in organizations and
are therefore largely covered by the eleventh pillar of
the GCI. The final pillar of competitiveness focuses on
technological innovation. Although substantial gains
can be obtained by improving institutions, building
infrastructure, reducing macroeconomic instability, or
improving human capital, all these factors eventually
run into diminishing returns. The same is true for the
efficiency of the labor, financial, and goods markets. In
the long run, standards of living can be largely enhanced
by technological innovation. Technological breakthroughs
have been at the basis of many of the productivity gains
that our economies have historically experienced. These
range from the industrial revolution in the 18th century
and the invention of the steam engine and the generation
of electricity to the more recent digital revolution. The
latter is not only transforming the way things are being
done, but also opening a wider range of new possibilities
in terms of products and services. Innovation is
particularly important for economies as they approach
the frontiers of knowledge and the possibility of
generating more value by only integrating and adapting
exogenous technologies tends to disappear.18
Although less-advanced countries can still improve
their productivity by adopting existing technologies
or making incremental improvements in other areas,
for those that have reached the innovation stage of
development this is no longer sufficient for increasing
productivity. Firms in these countries must design

and develop cutting-edge products and processes to
maintain a competitive edge and move toward even
higher value-added activities. This progression requires
an environment that is conducive to innovative activity
and supported by both the public and the private
sectors. In particular, it means sufficient investment
in research and development (R&D), especially by the
private sector; the presence of high-quality scientific
research institutions that can generate the basic
knowledge needed to build the new technologies;
extensive collaboration in research and technological
developments between universities and industry; and
the protection of intellectual property, in addition to high
levels of competition and access to venture capital and
financing that are analyzed in other pillars of the Index.
In light of the recent sluggish recovery and rising fiscal
pressures faced by advanced economies, it is important
that public and private sectors resist pressures to cut
back on the R&D spending that will be so critical for
sustainable growth going into the future.
The interrelation of the 12 pillars
Although we report the results of the 12 pillars of
competitiveness separately, it is important to keep
in mind that they are not independent: they tend to

reinforce each other, and a weakness in one area often
has a negative impact in others. For example, a strong
innovation capacity (pillar 12) will be very difficult to
achieve without a healthy, well-educated and trained
workforce (pillars 4 and 5) that is adept at absorbing new
technologies (pillar 9), and without sufficient financing
(pillar 8) for R&D or an efficient goods market that makes
it possible to take new innovations to market (pillar 6).
Although the pillars are aggregated into a single index,
measures are reported for the 12 pillars separately
because such details provide a sense of the specific
areas in which a particular country needs to improve.
The appendix describes the exact composition of
the GCI and technical details of its construction.
STAGES OF DEVELOPMENT AND THE WEIGHTED
INDEX
While all of the pillars described above will matter to a
certain extent for all economies, it is clear that they will
affect them in different ways: the best way for Cambodia
to improve its competitiveness is not the same as the
best way for France to do so. This is because Cambodia
and France are in different stages of development: as
countries move along the development path, wages tend

Table 1: Subindex weights and income thresholds for stages of development

STAGES OF DEVELOPMENT
Stage 1:
Factor-driven

Transition from
stage 1 to stage 2

Stage 2:
Efficiency-driven

Transition from
stage 2 to stage 3

<2,000

2,000–2,999

3,000–8,999

9,000–17,000

>17,000

Weight for basic requirements subindex

60%

40–60%

40%

20–40%

20%

Weight for efficiency enhancers subindex

35%

35–50%

50%

50%

50%

5%

5–10%

10%

10–30%

30%

GDP per capita (US$) thresholds*

Weight for innovation and sophistication factors

Stage 3:
Innovation-driven

Note: See individual country/economy profiles for the exact applied weights.
* For economies with a high dependency on mineral resources, GDP per capita is not the sole criterion for the determination of the stage of development. See text for details.

to increase and, in order to sustain this higher income,
labor productivity must improve.
In line with well-known economic theory of stages
of development, the GCI assumes that, in the first
stage, the economy is factor-driven and countries
compete based on their factor endowments—primarily
unskilled labor and natural resources.19 Companies
compete on the basis of price and sell basic products
or commodities, with their low productivity reflected in
low wages. Maintaining competitiveness at this stage
of development hinges primarily on well-functioning
public and private institutions (pillar 1), a well-developed
infrastructure (pillar 2), a stable macroeconomic
environment (pillar 3), and a healthy workforce that has
received at least a basic education (pillar 4).
As a country becomes more competitive,
productivity will increase and wages will rise with
advancing development. Countries will then move
into the efficiency-driven stage of development, when
they must begin to develop more efficient production
processes and increase product quality because
wages have risen and they cannot increase prices. At
this point, competitiveness is increasingly driven by
higher education and training (pillar 5), efficient goods
markets (pillar 6), well-functioning labor markets (pillar
7), developed financial markets (pillar 8), the ability to
harness the benefits of existing technologies (pillar 9),
and a large domestic or foreign market (pillar 10).
Finally, as countries move into the innovation-driven
stage, wages will have risen by so much that they are
able to sustain those higher wages and the associated
standard of living only if their businesses are able to
compete with new and unique products. At this stage,
companies must compete by producing new and
different goods using the most sophisticated production
processes (pillar 11) and by innovating new ones (pillar 12).
The GCI takes the stages of development into
account by attributing higher relative weights to those
pillars that are more relevant for an economy given its
particular stage of development. That is, although all 12
pillars matter to a certain extent for all countries,
the relative importance of each one depends on
a country’s particular stage of development. To

10 | The Global Competitiveness Report 2013–2014

implement this concept, the pillars are organized into
three subindexes, each critical to a particular stage of
development.
The basic requirements subindex groups those
pillars most critical for countries in the factor-driven
stage. The efficiency enhancers subindex includes
those pillars critical for countries in the efficiency-driven
stage. And the innovation and sophistication factors
subindex includes the pillars critical to countries in the
innovation-driven stage. The three subindexes are shown
in Figure 1.
The weights attributed to each subindex in every
stage of development are shown in Table 1. To obtain
the weights shown in the table, a maximum likelihood
regression of gross domestic product (GDP) per capita
was run against each subindex for past years, allowing
for different coefficients for each stage of development.20
The rounding of these econometric estimates led to the
choice of weights displayed in Table 1.
Implementation of stages of development
Two criteria are used to allocate countries into stages of
development. The first is the level of GDP per capita at
market exchange rates. This widely available measure
is used as a proxy for wages because internationally
comparable data on wages are not available for all
countries covered. The thresholds used are also shown
in Table 1. A second criterion is used to adjust for
countries that, based on income, would have moved
beyond stage 1, but where prosperity is based on the
extraction of resources. This is measured by the share
of exports of mineral goods in total exports (goods and
services), and assumes that countries that export more
than 70 percent mineral products (measured using a
five-year average) are to a large extent factor driven.21
However, for some resource-based economies that
have reached very high levels of income, the capacity
to increase the productivity of any other sector beyond
mineral production will be based on the country’s
capacity to boost innovation, as adopting technology
from abroad is not sufficient to increase productivity
to a degree that can sustain their high wage levels.
At the same time these countries can afford to invest

in innovation, given their high income. Consequently,
countries that are resource driven and significantly
wealthier than economies at the technological frontier
are classified in the innovation-driven stage.22
Any countries falling in between two of the three
stages are considered to be “in transition.” For these
countries, the weights change smoothly as a country
develops, reflecting the smooth transition from one
stage of development to another. This allows us
to place increasingly more weight on those areas
that are becoming more important for the country’s
competitiveness as the country develops, ensuring that
the GCI can gradually “penalize” those countries that
are not preparing for the next stage. The classification
of countries into stages of development is shown in
Table 2.

DATA SOURCES
To measure these concepts, the GCI uses statistical
data such as enrollment rates, government debt, budget
deficit, and life expectancy, which are obtained from
internationally recognized agencies, notably the World
Bank, the International Monetary Fund (IMF), the United
Nations Educational, Scientific and Cultural Organization
(UNESCO), and the World Health Organization (WHO).
The descriptions and data sources of all these statistical
variables are summarized in the Technical Notes and
Sources at the end of this Report. Furthermore, the
GCI uses data from the World Economic Forum’s
annual Executive Opinion Survey (the Survey) to capture
concepts that require a more qualitative assessment or
for which internationally comparable statistical data are
not available for the entire set of economies. The Survey
administration and computation of the Survey results
used in the GCI are further described in Chapter 1.3 of
this Report.

ADJUSTMENTS TO THE GCI
The composition of the GCI 2013–2014 is detailed
in the appendix of this chapter. This year only minor
adjustments were made to the Index, following a
thorough review of the Survey instrument in late 2012.
The following changes were made:
• From the first pillar, we removed the indicator
Government services for improved business
performance.
• We replaced the indicator Effect of taxation on
incentives to work and invest (indicator 6.04 in the
GCI 2012–2013) with two new indicators derived
from the Survey: the first captures the effect of
taxation on incentives to invest and is included in the
sixth pillar as indicator 6.04; the second measures
the effect of taxation on incentives to work and
enters the seventh pillar as indicator 7.05.
• We replaced the indicator Brain drain (indicator
7.07 in the GCI 2012–2013) with two new indicators
derived from the Survey, measuring the capacity
of a country to retain talent (indicator 7.08) and to
attract talent (indicator 7.09), respectively. Both are
part of the seventh pillar.
COUNTRY COVERAGE
The coverage this year has increased from 144 to 148
economies. The newly covered countries are Myanmar,
Bhutan, and Lao PDR. We have also re-instated Tunisia
and Angola into the Index, two countries that were not
included in last year’s edition. Tajikistan is not covered in
this year’s Report as Survey data could not be collected
this year.
THE GLOBAL COMPETITIVENESS INDEX 2013–2014
RANKINGS
Tables 3 through 7 provide the detailed rankings of this
year’s GCI. The following sections discuss the findings
of the GCI 2013–2014 for the top performers globally,
as well as for a number of selected economies in each
of the five following regions: North America, Europe,
and Eurasia; Asia and the Pacific; Latin America and the
Caribbean; the Middle East and North Africa; and subSaharan Africa.23
Top 10
As in previous years, this year’s top 10 remain dominated
by a number of European countries, with Switzerland,
Finland, Germany, Sweden, the Netherlands, and the
United Kingdom confirming their places among the most
competitive economies. Three Asian countries also figure
in top 10, with Singapore remaining the second-most
competitive economy in the world, and Hong Kong SAR
and Japan placing 7th and 9th. It is worth noting that a

12 | The Global Competitiveness Report 2013–2014

vast majority of the top 10 most competitive economies
share strengths in innovation and a strong institutional
framework.
Switzerland retains its 1st place position again this
year as a result of its continuing strong performance
across the board. The country’s most notable strengths
are related to innovation and labor market efficiency as
well as the sophistication of its business sector (ranking
2nd in all three). Switzerland’s top-notch scientific
research institutions, along with other factors, make
the country a top innovator. Productivity is further
enhanced by a business sector that offers excellent onthe-job-training opportunities, both citizens and private
companies that are proactive at adapting the latest
technologies, and labor markets that balance employee
protection with business efficiency. Moreover, public
institutions in Switzerland are among the most effective
and transparent in the world (5th). Governance structures
ensure a level playing field, enhancing business
confidence: these include an independent judiciary,
a strong rule of law, and a highly accountable public
sector. Competitiveness is also buttressed by excellent
infrastructure (6th) and highly developed financial
markets (11th). Finally, Switzerland’s macroeconomic
environment is among the most stable in the world (11th)
at a time when many neighboring economies continue
to struggle in this area. While Switzerland demonstrates
many competitive strengths, maintaining its innovative
capacity will require boosting the university enrollment
rate of 56.8 percent, and also increasing the participation
rate of women in the economy (86 percent) which
continue to trail many other high-innovation countries. A
more detailed analysis of Switzerland’s competitiveness
is presented in Box 3.
Singapore ranks 2nd overall for the third
consecutive year, owing to an outstanding performance
across all the dimensions of the GCI. Again this year,
it is the only economy to feature in the top 3 of seven
out of the 12 pillars of the GCI; it also appears in the
top 10 of two others. It dominates the goods market
efficiency pillar and the labor market efficiency pillar, and
places 2nd in the financial market development pillar.
Furthermore, the city-state boasts one of the world’s
best institutional frameworks (3rd), even though it loses
the top spot to Finland in the related pillar. Singapore
also possesses world-class infrastructure (2nd), with
excellent roads, ports, and air transport facilities. Its
economy can also rely on a sound macroeconomic
environment and fiscal management (18th)—the budget
surplus amounted to 5.7 percent of GDP in 2012.
Singapore’s competitiveness is further enhanced by its
strong focus on education, which has translated into a
steady improvement of its ranking in the higher education
and training pillar, where it comes in 2nd, behind Finland.
Singapore’s private sector is also becoming increasingly
sophisticated (17th) and more innovative (9th), although

Box 3: Switzerland: Five years at the top of the competitiveness rankings
This year marks Switzerland’s fifth year at the top of the
Global Competitiveness Index (GCI) rankings. The Global
Competitiveness Report has long singled out Switzerland for
its extraordinary competitiveness levels. What is the formula
that makes this small European country so successful?
Amid the travails of the euro area in recent years,
Switzerland has displayed an impressive growth performance.
Switzerland’s macroeconomic environment is among the
most stable in the world at a time when many neighboring
economies continue to struggle in this area. The successful
implementation of the “debt brake” a decade ago—
overwhelmingly supported by a large part of the population—
has been one of many steps taken toward a stable
macroeconomic environment. Yet, despite Switzerland’s
decision to remain outside the European Union (EU), its
economy is in fact highly integrated with other European
markets, notably through the bilateral agreements that are in
place. Exports to the European Union make up well above
50 percent of total exports, 1 and the effects of the sovereign
debt crisis in Europe on Switzerland’s monetary policy have
highlighted just how highly connected the Swiss economy is
to that of its European neighbors.
Three of the most important drivers of Swiss
competitiveness are being highlighted here: its excellent
institutions, the dynamism of its markets, and its capacity
for innovation. However, many qualities drive Switzerland’s
excellent economic performance and one cannot point to a
single factor that has brought about success.
Institutions and decision making
Overall, public institutions in Switzerland are among the
most effective and transparent in the world (ranked 5th; see
Table 1). One thing that sets the country apart from any other
is its unique governance structure. In addition to its highly
decentralized form of federalism, seven members of the
Federal Council act as a collective head of state. 2 The political
system ensures cohesive and inclusive leadership across
political boundaries, which enables the country to implement
a long-term economic agenda. Also important is the

country’s strong collaborative culture among stakeholders.
Government, business, and civil society work together in a
coherent way to find solutions for the country. This effort is
facilitated by the strong involvement of its population, which
votes on major decisions directly. Governance structures—
including an independent judiciary, a strong rule of law, and
a highly accountable public sector—ensure a level playing
field, enhancing business confidence and thus reinforcing
competitiveness.
However, one should note that private institutions
face a number of challenges. Although corporate ethics
are very strong (4th) and the strength of auditing and
reporting standards quite good (21st), shareholder interests
are noticeably less well protected than in other advanced
economies (the country ranks a low 134th rank on the World
Bank’s strength of investor protection index). 3
A good environment for business to thrive
Productivity is further enhanced by a highly sophisticated
business environment supported by well-functioning labor
and financial markets. Swiss companies offer high-quality
products (1st) and compete across a very sophisticated
product range (1st). Indeed, their highly diversified and wideranging product and service offerings—which extend from
financial and insurance services and watches to industrial
machines and pharmaceuticals—has helped alleviate the
adverse effects of the strong appreciation of the Swiss franc,
with the market share of Swiss goods having remained
largely stable. 4 Yet the country’s goods market features
characteristics of a dual nature. Its very outward-looking,
export-led economy that relies on highly sophisticated
products and management practices stands in contrast to
an inward-looking, protective agricultural policy. Switzerland
ranks 75th on agricultural policy costs (the net impact of
subsidies adds over 70 percent to value-added at producer
prices, compared with the EU average of 33.9 percent). 5 In
addition, the country’s well-managed natural resources make
it a major tourist attraction, as highlighted by the country’s

Box 3: Switzerland: Five years at the top of the competitiveness rankings (cont’d.)
1st place ranking in every edition of The Travel & Tourism
Competitiveness Report since it was first released in 2007. 6
Against the current high unemployment in Europe and
other parts of the world, Switzerland compares extremely
well: it boasted an unemployment rate of just 4.2 percent
in 2012. 7 The country has a top-notch labor market that is
both flexible and efficient in deploying its talent (see Table 2).
Employee protection and the interest of employers are well
aligned, with strong employer-employee relations (ranking 1st),
and with conflict resolution resting on social dialogue rather
than responding with strikes. Further, the educational system,
also 1st, is perceived as outstanding, producing a highly
skilled labor force that continues to receive important on-thejob training. 8 Unlike many other countries, Switzerland’s labor
force is growing, thanks to the migration of particularly skilled
labor, boosted by the bilateral agreements on free circulation
with the European Union that entered into force in 2002.
Finding ways to integrate more women into the labor force will
be important for enhancing the country’s talent pool further.
The financial market in Switzerland also functions well
and has bounced back to 11th place since the financial crisis.
The findings point to signs of a restoration of confidence in
the banking sector, suggesting that markets are adapting
quickly to the changing reality: the sector itself is diversifying
and still managing to attract a significant client base.
Swiss regulatory authorities have been making progress in
regulating the financial sector and overhauling requirements
to formulate contingency recovery plans. Yet risks remain. The
global crisis has also highlighted the strong interdependence
of the Swiss financial sector with that of the rest of the world,
and its major banks are considered “too big to fail” not only
for Switzerland but also globally. 9 Repercussions elsewhere
in the world impact the Swiss economy, as evidenced by
the historically low interest rates in Switzerland, giving rise
to high mortgage lending. Disputes about tax evasion and
continued pressure from other countries are ushering the
end of the country’s bank secrecy, which may require further
adjustments.
Innovation
Innovation is not just about coming up with new products—it
is also about doing things differently. For this to happen,
the entire innovation ecosystem, which consists of a set of
closely intertwined and reinforcing factors, is critical. In the
case of Switzerland, an excellent innovation ecosystem has
been a significant part of making the country an attractive
place to work for highly qualified people. Its well-functioning
labor market and excellent educational system provide the
fundamentals for innovation to prosper, instigating the close
relationships among enterprises, universities, and research
institutes that have made the country a top innovator. Its
scientific research institutions are among the world’s best,
and the strong collaboration between its academic and
business sectors, combined with high company spending
on research and development, ensures that much of
this research is translated into marketable products and
processes reinforced by strong intellectual property
protection. This robust innovative capacity is captured by its
high rate of patenting per capita, for which Switzerland ranks
2nd.

Outlook for the future
Going forward, it will be important for Switzerland to resist
drifting toward complacency. It is clear that, at present, it
is a magnet for global talent and an excellent innovator. Its
banking sector is, however, under scrutiny, and this traditional
economic engine is necessarily undergoing great change. In
the future, it will be important for the country to continue to
build on its competitive strengths and resist overregulation
and protectionism.
Notes
1

For information about Swiss exports, see http://
stat.wto.org/CountryProfile/WSDBCountryPFView.
aspx?Language=E&Country=CH.

2

A president is nominated each year from among the seven federal
councillors. The president takes on largely representative functions
but has no additional power.

3

The strength of investor protection index is the average of the
World Bank’s Doing Business: Extent of disclosure index, the
Extent of director liability index, and the Ease of shareholder suits
index. See technical notes at the end of the Report for more
detailed information.

room for improvement exists in both areas, which are the
keys to Singapore’s future prosperity.
Finland retains its 3rd position. Similar to other
countries in the region, the country boasts wellfunctioning and highly transparent public institutions
(1st), topping several indicators included in this category.
Its private institutions, ranked 3rd overall, are also
seen to be among the best run and most ethical in the
world. Finland also occupies the top position both in
the health and primary education pillar and the higher
education and training pillar, the result of a strong focus
on education over recent decades. This has provided
the workforce with the skills needed to adapt rapidly to
a changing environment and has laid the groundwork
for high levels of innovation, allowing Finland to become
a highly innovative economy. Improving the country’s
capacity to adopt the latest technologies (ranked 18th)
could lead to important synergies that could, in turn,
further reinforce the country’s competitive position going
forward. Finland’s macroeconomic environment has
weakened slightly on the back of rising inflation (above 3
percent), but it fares comparatively well when contrasted
with other euro-zone economies.
Germany moves up by two notches to 4th place
this year. The country is ranked an excellent 3rd for
the quality of its infrastructure, boasting in particular
first-rate facilities across all modes of transport. The
goods market is quite efficient and is characterized
by intense local competition (10th) and low market
dominance by large companies (2nd). Germany’s
business sector is very sophisticated, especially when
it comes to production processes and distribution
channels. German companies are among the most
innovative in the world, spending heavily on R&D (4th)
and displaying a high capacity for innovation (3rd)—traits
that are complemented by the country’s well-developed
ability to absorb the latest technologies at the firm level
(16th). Research institutions are assessed as being of
higher quality than in previous years, and scientists
and engineers appear to be more readily available. All
these attributes allow Germany to benefit greatly from its
significant market size (5th), which is based on both its
large domestic market and its strong exports.
Some shortcomings remain with respect to labor
markets and the educational system. Despite some
improvement (from 53rd to 41st), Germany’s labor
market remains rigid (113th for the labor market flexibility
subpillar), where a lack of flexibility in wage determination
and the high cost of firing hinder job creation, particularly
during business cycle downturns. To maintain Germany’s
competitiveness, the quality of the educational system—
where, at 23rd place, the country continues to trail most
of its top 10 peers—needs to be improved further. But
the country has already registered an improvement
across all educational quality indicators in the GCI, an
important basis for sustained innovation-led growth.

After having declined for four consecutive years in
the ranking, the United States reverses its downward
trend, rising by two positions to take 5th place this year
and overtaking the Netherlands and Sweden. While
the economy is getting back on track, the deleveraging
process in the banking sector continues to show positive
effects on the stability and efficiency of the country’s
financial markets, improving from 31st three years ago
to 10th this year in that pillar. At the same time, the
assessment of public institutions is slightly more positive,
which is a hopeful outcome after a number of years of
weakening confidence in this area.
Overall, many structural features continue to make
the US economy extremely productive. US companies
are highly sophisticated and innovative, supported by an
excellent university system that collaborates admirably
with the business sector in R&D. Combined with flexible
labor markets and the scale opportunities afforded by
the sheer size of its domestic economy—the largest
in the world by far—these qualities continue to make
the United States very competitive. On the other hand,
some weaknesses in particular areas remain. Although
the assessment of institutions improves this year, the
business community continues to be rather critical, with
trust in politicians still somewhat weak (50th), concerns
about the government’s ability to maintain arms-length
relationships with the private sector (54th), and a general
perception that the government spends its resources
relatively wastefully (76th). The macroeconomic
environment continues to be the country’s greatest area
of weakness (117th), although the deficit is narrowing for
the first time since the onset of the financial crisis.
Sweden falls two places to 6th position. Like
Switzerland, the country has been placing significant
emphasis on creating the conditions for innovationled growth. Although the assessment has deteriorated
slightly over the past year—mainly due to a somewhat
weaker macroeconomic environment—the quality of
Sweden’s public institutions remains first rate, with a
very high degree of efficiency, trust, and transparency.
Private institutions also receive excellent marks, with
firms that demonstrate highly ethical behavior. Additional
strengths include goods and financial markets that are
very efficient, although the labor market could be more
flexible (Sweden ranks 57th on the flexibility subpillar).
Combined with a strong focus on education over the
years and a high level of technological readiness (1st),
Sweden has developed a very sophisticated business
culture (7th) and is one of the world’s leading innovators
(6th). These characteristics come together to make
Sweden one of the most productive and competitive
economies in the world.
Hong Kong SAR further consolidates its position
among the 10 most competitive economies, advancing
a further two places to 7th, thanks to a consistently
strong performance. In particular, Hong Kong tops the

infrastructure pillar for the fourth consecutive edition,
reflecting the outstanding quality of its facilities across all
modes of transportation. It also dominates the financial
market development pillar, owing to the high level of
efficiency, trustworthiness, and stability of the system. As
in the case of Singapore, the dynamism and efficiency of
Hong Kong’s goods market (2nd) and labor market (3rd)
further contribute to its excellent overall positioning. In
order to enhance its competitiveness, Hong Kong must
improve on higher education (22nd) and innovation (23rd,
up three). In the latter category, the quality of research
institutions (31st) and the limited availability of scientists
and engineers (32nd) remain the two key issues to be
addressed.
After having moved up in the rankings in the
last edition, the Netherlands loses three places and
slips to 8th place this year. The drop mainly reflects
weakening financial markets and, in particular, rising
concerns regarding the stability of banks. Overall, the
economy is highly productive due to some pronounced
strengths. Dutch businesses are highly sophisticated
(4th) and innovative (10th), and the country is rapidly
and aggressively harnessing new technologies for
productivity improvements (8th). Its excellent educational
system (ranked 4th for health and primary education and
6th for its higher education and training) and efficient
markets—especially its goods market (8th)—are highly
supportive of business activity. And although the country
has registered fiscal deficits in recent years (4.15 percent
of GDP in 2012), its macroeconomic environment is
stronger than that of a number of other advanced
economies. Last but not least, the quality of its
infrastructure is among the best in the world, reflecting
excellent facilities for maritime, air, and railroad transport,
which are ranked 1st, 4th, and 11th, respectively.
Up one position, Japan now ranks 9th with a
score almost unchanged since last year. The country
continues to enjoy a major competitive edge in business
sophistication (1st for the fifth consecutive year) and in
innovation (5th). High R&D spending (2nd), availability of
talent (4th), world-class research institutions (9th), and
capacity to innovate (6th) are among Japan’s strengths.
Indeed, in terms of innovation output, this pays off:
the country has the fourth-highest number of patent
applications per capita in the world. Further, companies
operate at the highest end of the value chain, producing
high-value-added goods and services. However, the
country’s overall competitive performance continues
to be dragged down by severe macroeconomic
weaknesses (127th). For the past four years, the budget
deficit has been hovering around 10 percent of GDP,
one of the highest ratios in the world, while the public
debt reached record levels, representing almost 240
percent of Japan’s GDP. It is unlikely that the coming
year will see a reversal in these trends in light of the
country’s aggressive monetary policy and various

24 | The Global Competitiveness Report 2013–2014

stimulus packages. In addition, the labor market (23rd,
down three) is characterized by persisting rigidities and
inefficiencies, including the lack of female participation in
the labor force (90th overall, the fifth lowest ratio among
the member states of the Organisation for Economic
Co-operation and Development, or OECD). Burdensome
regulation, notably for business creation; high taxation;
various trade barriers (111th); and a relative isolation,
resulting in low foreign investment and ownership and a
weak capacity to attract talent (80th), represent Japan’s
major competitive weaknesses. It remains to be seen
whether the government will deliver on its promise to
address those structural issues as part of its strategy to
revitalize Japan’s economy.
The United Kingdom (10th) rounds out the top
10, falling by two places in this year’s assessment.
The country deteriorates slightly in several areas, most
notably its macroeconomic environment and its financial
markets. Overall, the United Kingdom benefits from clear
strengths such as the efficiency of its labor market (5th),
in sharp contrast to the rigidity of those of many other
European countries. The country continues to have
sophisticated (9th) and innovative (12th) businesses that
are highly adept at harnessing the latest technologies
for productivity improvements and operating in a very
large market (it is ranked 6th for market size). The highly
developed financial market also remains a strength
overall, despite some weakening since last year. All these
characteristics are important for spurring productivity
enhancements. On the other hand, the country’s
macroeconomic environment (115th, down from 85th
two years ago) represents the greatest drag on its
competitiveness, with a fiscal deficit above 8 percent in
2012, an increase of over 7 percentage points in public
debt amounting to 90.3 percent of GDP in 2012 (136th),
and a comparatively low national savings rate (10.8
percent of GDP in 2012, 122nd).
North America, Europe, and Eurasia
Throughout the past year, much of Europe has
continued to struggle with financial and structural
challenges. Far-reaching actions were taken in Europe
to avoid the breakup of the euro zone and bring the
region onto a more dynamic growth path, mainly
through macroeconomic measures and, to some extent,
through structural reforms especially in peripheral
euro zone countries. Although measures to improve
competitiveness in some countries seem to have started
bearing fruit, low global and regional demand continues
to constrain growth, and several core countries still
must reform their own economies in order to once again
become engines of growth. See also Box 4 on regional
competitiveness in the European Union.
Despite these challenges, several European
countries continue to feature prominently among the
most competitive economies in the world. As described

Box 4: The European Union’s Regional Competitiveness Index
Paola Annoni and Lewis Dijkstra
European Commission, Joint Research Centre and the Directorate-General for Regional and Urban Policy
regions, but more is provided to less developed ones. These
investments also support the Europe 2020 strategy.
The RCI also can be a useful tool for EU countries
with a large gap in the competitiveness of their regions.
EU countries with a large gap or high variation in regional
competitiveness should consider to what extent these gaps
are harmful for their national competitiveness and whether
they can be reduced, possibly with the support of Cohesion
Policy. For example, in Romania, the Slovak Republic,
and France the gap between the capital region and the
second most competitive region is very wide, while regional
competitiveness in Germany shows no large differences.
The 2010 edition of the RCI had already noted the
lack of regional spillovers, particularly around the capitals
of some of the less-developed EU countries. Although the
economic crisis may have limited the potential growth of
regional spillovers, in the medium term such spillovers should
be strengthened. The overall competitiveness of a country
depends on the performance of all its regions, not of its
capital region alone.
The RCI reveals substantial differences in
competitiveness within some countries (see Figure 1). In
France, Spain, the United Kingdom, the Slovak Republic,
Romania, Sweden, and Greece, the level of variability across
regions is particularly high, with the capital region always
being the best performer, except for Italy, the Netherlands,
and Germany, where the capital region is not the most
competitive.
Earlier territorial research highlighted the existence of the
“blue banana” corridor of urbanization that linked the region of
greater London all the way to Lombardy, passing through the
Benelux countries and Bavaria, or a pentagon linking London,

To measure the different dimensions of competitiveness at
the regional level, the European Commission has developed
the Regional Competitiveness Index (RCI), which was inspired
by the structure of the Global Competitiveness Index. The
RCI was published in 2010 and again in 2013 through a
coordinated effort of the European Commission’s Joint
Research Centre and the Directorate-General for Regional
Policy. The regional dimension is important because many
of the factors of competitiveness are influenced or even
determined by regional and city authorities. The trend toward
more decentralization in Europe makes the role of cities and
regions even more important. The strong regional dimension
of competitiveness, with more variation between regions than
between countries, confirms the influence and role of regions
and cities.
Main results
The RCI highlights the competitive strengths and weaknesses
of each of the European Union (EU)’s regions. 1 It can
provide a guide to what each region should focus on, taking
into account its specific situation and its overall level of
development. This is particularly important for the preparation
of the EU Cohesion Policy programs for 2014–20. The
European Union will provide 325 billion euros to co-finance
these seven-year programs. The programs are implemented
by the countries, regions, or cities following an agreed
strategy. These programs can improve transport or Internet
access, boost innovation, encourage entrepreneurship, invest
in energy efficiency, and enhance education and skills.
The objective of the Cohesion Policy is to reduce
regional disparities by investing in job creation,
competitiveness, economic growth, improved quality of life
and sustainable development. Funding is provided to all

Paris, Milan, Munich, and Hamburg. These areas were seen
as having the highest concentrations of economic activity.
This line of research emphasized a strong core-periphery
pattern of economic activity in Europe.

The RCI, however, shows a more polycentric pattern,
with strong capital and metropolitan regions in many parts
of Europe. For example, the regions that include Stockholm,
Copenhagen, Helsinki, Prague, Bratislava, and Madrid all have
a high level of competitiveness (see Figure 2). 2 With the right
policies and investments, regions outside the core of Europe
can also become highly competitive.
Eight out of the top 10 regions in the 2013 RCI confirm
their position with respect to 2010. The most competitive
region in both editions is Utrecht. Also present in the top 10 in
2010 were the London functional economic region; the group
comprising Berkshire, Buckinghamshire, and Oxfordshire;
the Amsterdam functional economic region; 3 Zuid-Holland;
the Danish region Hovedstaden (includes Copenhagen);
Stockholm; and Île de France (includes Paris) (see Table 1).
The new entries in the 2013 top 10 are Darmstadt
(includes Frankfurt) in Germany and Surrey, East and West
Sussex in the United Kingdom. It is striking that eight out of
the top 10 are either capital regions or regions that include
large cities.
At the other end of the competitiveness scale, we find
some regions that are, unfortunately, consistently the least
competitive. These are the Bulgarian region Severozapaden,
the Greek region Notio Aigaio, and the two southern
Romanian regions Sud-Est and Sud-Vest Oltenia. Figure 2
shows the results for all regions assessed.
Methodology
The RCI is built on a broad definition of regional
competitiveness that can be summarized as “the ability to
offer an attractive and sustainable environment for firms

Figure 2: RCI 2013 results

Canarias

Guyane

Guadeloupe
Martinique

Réunion
Mayotte
Açores

Madeira

Values range from low (negative)
to high (positive)
n less than or equal to –1
n –1 to –0.5
n –0.5 to –0.2
n –0.2 to 0
n 0 to 0.2
n 0.2 to 0.5
n 0.5 to 1
n greater than or equal to 1

Box 4: The European Union’s Regional Competitiveness Index (cont’d.)
and residents to live and work.” This definition focuses on
the close link between competitiveness and prosperity,
characterizing competitive regions not only in output-related
terms but also by overall socioeconomic performance and
potential.
The RCI was first published in 2010 and included 69
indicators. It builds on the methodology developed by the
World Economic Forum for the Global Competitiveness
Index, and has proved to be a robust way to summarize
many different indicators in one index. The index covers a
wide range of issues, and includes innovation, quality of
institutions, availability and usage of infrastructure (comprising
digital networks), and measures of health and human capital.
It has been used in many regions in the European Union and
has sparked similar initiatives in Australia and South Africa.
The RCI 2013 is the second edition of the index and
takes in updated and improved data together with method
refinements. Croatia has been included in the 2013 edition,
as it joined the European Union on July 1, 2013. The RCI
2013 is based on a set of 73 indicators and follows the
same framework and structure of the 2010 edition. Data
for all the indicators mainly span the period between 2009
and 2011. As for the previous version, the index is based
on 11 pillars describing both inputs and outputs of territorial
competitiveness. Pillars are grouped into three sets describing
basic, efficiency, and innovative factors of competitiveness.
The pillar groups are weighted differently according to the
region’s development stage in terms of gross domestic
product per capita.
The basic pillars represent the basic drivers of all
economies. They include (1) Institutions, (2) Macroeconomic

above, six of them are among the top 10. In total, 10 are
among the top 20, as follows: Switzerland (1st), Finland
(3rd), Germany (4th), Sweden (6th), the Netherlands
(8th), the United Kingdom (10th), Norway (11th), Denmark
(15th), Austria (16th), and Belgium (17th). However,
Europe is also a region with significant disparities in
competitiveness, with several countries from the region
significantly lower in the rankings (with Spain at 35th,
Italy at 49th, Portugal at 51st, and Greece at 91st). As in
previous years, North American countries feature among
the most competitive economies worldwide, with the
United States occupying the 5th position and Canada
the 14th.
Norway rises by four places in the rankings to a
remarkable 11th this year, with progress in a number
of areas. Specifically, the country features a notable
improvement in the uptake of ICTs, particularly increasing
Internet bandwidth and greater penetration of mobile
broadband. Similar to the other Nordic countries,
Norway is further characterized by well-functioning and
transparent public institutions; private institutions also get

Stability, (3) Infrastructure, (4) Health, and (5) Basic Education.
These pillars are most important for less-developed regions.
The efficiency pillars are (6) Higher Education and
Lifelong Learning, (7) Labor Market Efficiency, and (8) Market
Size.
The innovation pillars, which are particularly important
for the most advanced regional economies, include (9)
Technological Readiness, (10) Business Sophistication, and
(11) Innovation. This group plays a more important role for
intermediate and especially for highly developed regions.
Overall, the RCI framework is designed to capture
short- as well as long-term capabilities of the regions. Further
information about the RCI 2013 is available at www.easu.jrc.
ec.europa.eu or www.ec.europa.eu/regional_policy.
Notes
1

The RCI uses NUTS 2 regions, which are the basic territorial
units for the application of regional policies. They are defined by
the Commission regulation on nomenclature of territorial units for
statistics (from the French Nomenclature des Unités Territoriales
Statistiques, or NUTS). NUTS level 2 refers to regions with an
average population size between 800,000 and 3 million.

2

The RCI does not include northern Italy, Wallonia, or eastern
France among the most competitive EU regions, which were
included in the core-periphery analyses.

3

To ensure that the regional competitiveness index does not break
up functional economic areas, the capital regions of Belgium,
the Czech Republic, Germany, the Netherlands, Austria, and
the United Kingdom were combined with one or more of the
neighboring regions to better capture the functional metropolitan
region. This ensures a good match between the workplace-based
indicators such as research and development and the residencebased indicators such as educational attainment.

admirable marks for ethics and accountability. Markets in
the country are efficient, with labor and financial markets
ranked 14th and 9th, respectively. Productivity is also
boosted by a good uptake of new technologies, ranked
an excellent 3rd overall for technological readiness,
up 10 places in this area since last year. Moreover,
Norway’s macroeconomic environment is ranked an
impressive 2nd out of all countries (up from 3rd last
year, and continuing an upward trend over the last
several years), driven by windfall oil revenues combined
with prudent fiscal management. On the other hand,
Norway’s competitiveness would be further enhanced by
continuing to upgrade its infrastructure (33rd), fostering
greater goods market efficiency and competition (22nd),
and further improving its environment for R&D.
Canada remains stable at 14th place. The country
continues to benefit from highly efficient markets (with
its goods, labor, and financial markets are ranked
17th, 7th, and 12th, respectively), well-functioning and
transparent institutions (14th), and excellent infrastructure
(12th). Canada is also successfully nurturing its human

resources compared with other advanced economies
(ranking 7th for health and primary education and
16th for higher education and training), providing
the workforce with the skills needed to succeed in a
competitive economy. Canada’s competitiveness would
be further enhanced by improvements in its innovation
ecosystem such as increased company-level spending
on R&D and government procurement of advanced
research products.
Denmark loses three positions this year at 15th,
placing just behind Canada, with a weakening in its
macroeconomic environment. Similar to its Nordic
neighbors, the country continues to benefit from one of
the best functioning and most transparent institutional
frameworks in the world (18th). Denmark also continues
to receive a first-rate assessment for its higher education
and training system (14th), which has provided the
Danish workforce with the skills needed to adapt rapidly
to a changing environment and has laid the ground for
high levels of technological adoption and innovation.
A continued strong focus on education would help to
reverse the downward trend in the country’s ranking and
to maintain the skill levels needed to provide the basis
for sustained innovation-led growth. A marked difference
from the other Nordic countries relates to labor market
flexibility, where Denmark (13th) continues to distinguish
itself as having one of the most efficient labor markets
internationally, with more flexibility in setting wages,
firing, and therefore hiring, along with a greater number
of workers than seen in the other Nordics and most
European countries more generally.
Austria is ranked 16th this year, demonstrating a
stable performance since last year. The country benefits
from excellent infrastructure (16th) and sophisticated
businesses (8th) that are highly innovative (15th). This
is buttressed by an education and training system that
does a good job of preparing the workforce, particularly
through a strong focus on on-the-job training (5th).
Austria’s competitiveness would be further enhanced by
greater flexibility in its labor market (the country is ranked
88th in this subpillar), and by continuing to improve its
already-excellent educational system.
Belgium is ranked 17th, retaining the same place as
last year. The country has outstanding health indicators
and a primary education system that is among the best
in the world (2nd). Belgium also boasts an exceptional
higher education and training system (5th), with excellent
math and science education, top-notch management
schools, and a strong propensity for on-the-job training
that contribute to a relatively high capacity to innovate
(14th). Its goods market is characterized by high levels
of competition and an environment that facilitates
new business creation. Business operations are also
distinguished by high levels of sophistication and
professional management processes. On the other hand,
there are some concerns about government inefficiency

28 | The Global Competitiveness Report 2013–2014

(56th) and its highly distortionary tax system, which
particularly reduces the incentives to work (142nd).
Moreover, its macroeconomic environment continues
to be burdened by persistent deficit spending and high
public debt.
France is ranked 23rd, down two places from
last year. The decline comes on the back of increasing
concerns among business leaders about the health
of the financial sector. France retains a number of
clear competitive advantages, including the country’s
infrastructure, which is among the best in the world (4th),
with outstanding transport links, energy infrastructure,
and communications. The health of the workforce
and the quality and quantity of education are other
strengths (ranked 24th for health and primary education
and 24th for higher education and training). These
elements have provided the basis for a business sector
that is aggressive in adopting new technologies for
productivity enhancements (France is ranked 17th for
technological readiness). In addition, the country’s
business culture is highly professional and sophisticated
(21st in the business sophistication pillar), buttressing
its good position in innovation (19th in the innovation
pillar, particularly in certain science-based sectors)
and bolstered by a large market (8th), all of which help
to boost the country’s growth potential. On the other
hand, France’s competitiveness would be enhanced
by injecting more flexibility into its labor market, which
is ranked a low 116th both because of the strict rules
on firing and hiring and the rather conflict-ridden laboremployer relations in the country. Its tax regime is also
perceived as highly distortive to decisions to work
(127th). Tentative efforts being made in these areas, if
implemented with rigor, would provide an important
boost to France’s economic performance going forward.
Ireland is ranked 28th this year with a relatively
stable performance. The country continues to benefit
from its excellent health and primary education system
(6th) and strong higher education and training (18th),
along with its well-functioning goods and labor markets,
ranked 11th and 16th, respectively. These attributes
have fostered a sophisticated and innovative business
culture (ranked 18th for business sophistication and 20th
for innovation), buttressed by excellent technological
adoption in the country (13th). Yet the country’s
macroeconomic environment continues to raise
significant concern (134th), showing little improvement
since last year. Of related and continuing concern is also
Ireland’s financial market (85th), although this seems to
be tentatively recovering since the trauma faced in recent
years, and confidence is slowly being restored.
Iceland is ranked at 31st position this year. Despite
significant difficulties in recent years, Iceland continues
to benefit from a number of clear competitive strengths
in moving to a more sustainable economic situation.
These include the country’s top-notch educational

system at all levels (9th and 12th in the health and
primary education and higher education and training
pillars, respectively) coupled with a relatively innovative
business sector (27th) that is highly adept at adopting
new technologies for productivity enhancements (10th).
Business activity is further supported by an efficient
labor market (17th) and well-developed infrastructure
(17th). On the other hand, a weakened macroeconomic
environment (118th) and financial markets (80th) remain
areas of concern, although these have measurably
improved since last year.
Estonia remains the best performer within
Eastern Europe, up two places this year to 32nd.
The country has an excellent educational system and
highly efficient and well-developed goods and financial
markets, as well as a strong commitment to advancing
technological readiness. In addition, Estonia’s 22nd rank
in macroeconomic stability reflects its relatively well
managed public finances. The country’s margin ahead
of the rest of the region also reflects its more flexible
and efficient labor markets (12th), which continue to be
rigid in other countries throughout much of Europe as a
whole.
Despite the current difficult conditions, Spain
goes up one notch in the rankings to 35th place.
The country continues to leverage its traditional
competitiveness strengths in terms of a world-class
transport infrastructure (6th), a good use of ICTs (23rd),
and—despite the high unemployment rate—a large and
skilled labor force, thanks to one of the highest tertiary
education enrollment rates in the world (8th). Moreover,
the country has started to address some of its most
pressing challenges. In the past year, Spain undertook
sharp public budget cuts that will help improve its stillweak macroeconomic situation; it also implemented a
series of structural reforms to improve the functioning of
its goods, labor, and financial markets. The liberalization
of certain services, the implementation of a labor
market reform to mitigate the rigidities of a dual labor
market, and the restructuring of the banking system
are all measures aimed at improving the efficiency
in the allocation of resources, whose full effects are
likely to become more visible in the medium term. As
a result of these and other measures at the European
level, the country has obtained access to international
financing markets at a more affordable cost than it
had at the time the previous edition of this Report was
released. However, this situation has not translated in
an improvement in access to financing for local firms—
which still suffer from an important credit crunch—to
upgrade or transform their production facilities. Access
to financing is regarded as the most problematic
factor for doing business, and the country ranks very
low in terms of the ease of accessing loans (138th)
or other sources of financing, either through equity
markets (101th) or venture capital (105th). In addition,

the reduction of both public and private budgets for
research and innovation could hamper the capacity
of local firms to innovate (57th) and contribute to the
economic transformation of the country. Addressing
these weaknesses will be crucial in order to bridge the
competitiveness gap with Northern European economies
the country continues to suffer.
Poland is ranked 42nd, with a relatively stable
performance since last year and a fairly even
performance across all 12 pillars of competitiveness.
Notable strengths include its large market size (20th)
and high educational standards, in particular its high
enrollment rates (it is ranked 18th on the quantity of
higher education subpillar). The financial sector is well
developed (38th), and banks are assessed as more
sound than they were only four years ago, although
additional strengthening will be necessary, given the
country’s still mediocre 54th rank on this indicator.
Further enhancing competitiveness will require a
significant upgrading of transport infrastructure, which
trails international standards by a considerable margin
(ranked 92nd). Although some progress has been made
over the past few years in this area in the context of
the European Football Championships in 2012, it is not
sufficient to create the step change necessary to better
connect the different parts of the country. The business
sector remains very concerned about some aspects of
the institutional framework, including the government
inefficiencies (121st)—in particular the high burden of
government regulation (133rd). As Poland transitions to
the innovation-driven stage of development, it will have
to focus more strongly on developing capacities in R&D
and business sophistication. Stronger R&D orientation
of companies, easier access to venture capital, and
intensified collaboration between universities and the
private sector would help the country to move toward a
more future-oriented development path.
Turkey falls by one position to 44th, following its
significant improvement last year. The macroeconomic
environment has deteriorated slightly, with a rising fiscal
deficit and inflation nearing double digits, although the
situation remains better than in many other European
economies. Turkey’s vibrant business sector derives
important efficiency gains from its large domestic
market (ranked 16th), which is characterized by intense
local competition (15th). Turkey also benefits from its
reasonably developed infrastructure (49th), particularly
roads and air transport, although ports and the electricity
supply require additional upgrading. In order to further
enhance its competitiveness, Turkey must focus on
building up its human resources base through better
primary education and healthcare (59th) and higher
education and training (65th), increasing the efficiency of
its labor market (130th), and reinforcing the efficiency and
transparency of its public institutions (58th).

The Czech Republic falls by seven places this
year to 46th position. Concerns remain about the quality
of the country’s public institutions, with public trust in
politicians ranked an extremely low 146th, ahead of only
Argentina and Lebanon globally. The macroeconomic
environment has worsened slightly with rising deficits
and debt, although (at 55th) it remains more stable
than in much of the rest of Europe. Czech businesses
are relatively sophisticated and innovative, buttressed
by a strong uptake of new technologies. The country’s
competitiveness would be further enhanced by
improvements to the educational system and by injecting
greater flexibility into the labor market.
After a slight improvement last year, Italy falls
back seven places to 49th position this year, with a
deterioration across the board and with the lack of clear
political direction over the past year increasing business
uncertainty and weighing down on the country’s
competitiveness. Italy continues to do well in some of the
more complex areas measured by the GCI, particularly
the sophistication of its businesses, where it is ranked
27th, producing goods high on the value chain with one
of the world’s best business clusters (2nd). Italy also
benefits from its large market size—the 10th largest
in the world—which allows for significant economies
of scale. However, Italy’s overall competitiveness
performance continues to be hampered by some critical
structural weaknesses in its economy. Its labor market
remains extremely rigid—it is ranked 137th for its labor
market efficiency, hindering employment creation. Italy’s
financial markets are not sufficiently developed to provide
needed finance for business development (124th).
Other institutional weaknesses include high levels of
corruption and organized crime and a perceived lack of
independence within the judicial system, which increase
business costs and undermine investor confidence—
Italy is ranked 102nd overall for its institutional
environment. Greater political stability in the country
and stronger efforts to address structural rigidities are
critical for boosting the country’s competitiveness. The
institutional reforms that are presently being proposed
by the government would be an important step toward
addressing some of these challenges.
Kazakhstan improves by one position to rank
50th this year. The country benefits from a flexible and
efficient labor market (15th) and a stable macroeconomic
environment (23rd) at a time when many countries are
struggling in these areas. Kazakhstan’s main challenges
relate to its health and primary education systems (97th),
its lack of business sophistication (94th), and its low
innovation (84th).
Portugal continues to fall in the rankings, coming
in at 51st place, two places down since last year. An
unstable macroeconomic environment (124th), similar
to other Southern European economies; a certain loss
of trust in politicians (77th) and in government efficiency

30 | The Global Competitiveness Report 2013–2014

(116th); and, above all, increasing difficulties in accessing
financing—either through the equity market (108th) or
loans (121st)—have contributed to this drop. Despite this
slight decline, the country is striving to regain productivity
and competitiveness by increasing liberalization of the
markets and labor market reforms. These are expected
to bear fruit in the medium term, helping the country
bridge the competitiveness divide with other European
economies. In this effort, Portugal will be able to
leverage its world-class transport infrastructure (19th)
and its well-prepared labor force thanks to high levels
of university education (26th), although it must be said
that the quality of this education (58th) is not always in
line with the productive needs of the country. In addition
to the recently undertaken reforms, the country should
not neglect strengthening its innovation potential through
efficient investments in science, technology, and other
intangible assets, such as advanced management
techniques. These factors will be crucial in allowing the
Portuguese economy to move toward higher-valueadded activities.
The Russian Federation, at 64th place, improves
by three positions since last year. The country’s
macroeconomic environment has continued to improve—
up from 44th two years ago to 19th this year because
of low government debt and a government budget
that has maintained a surplus. Other strengths include
its high level of education enrollment, especially at the
tertiary level; its fairly good infrastructure; and its large
domestic market (8th), all of which represent areas that
can be leveraged to improve Russia’s competitiveness.
On the other hand, the country continues to receive a
poor assessment of its public institutions (118th) and
shows a lack of innovation capacity (78th). Russia
suffers from inefficiencies in the goods (126th), labor
(72nd), and financial (121st) markets. The weak level of
competition (135th)—caused by inefficient anti-monopoly
policies (116th) and high restrictions on trade and foreign
ownership as well as a lack of trust in the financial
system (132nd)—contributes to this inefficient allocation
of Russia’s vast resources, hampering higher levels of
productivity in the economy. Moreover, as the country
moves toward a more advanced stage of economic
development, its lack of business sophistication
(107th) and low rates of technological adoption (127th)
will become increasingly important challenges for its
sustained progress.
After improving somewhat last year, Ukraine falls
back by 11 places to 84th position in this year’s GCI.
Overall, Ukraine maintains its competitive strengths.
These result from its large market size (38th) and a solid
educational system that provides easy access to all
levels of education (ranked 43rd on higher education
and training and 57th on primary education). Putting
economic growth on a more stable footing in future
will require Ukraine to address important challenges.

Arguably, the country’s most important challenge is
the needed overhaul of its institutional framework,
which suffers from red tape, a lack of transparency,
and favoritism. Ukraine could realize further efficiency
gains from instilling more competition into its goods and
services markets (124th) and continuing the reform of its
financial and banking sector (117th).
This year Greece, after falling over the past
several years, improves in the rankings to 91st place.
Although it remains the lowest-ranked country of the
European Union and the results in the macroeconomic
environment pillar continue to raise concern (second to
last at 147th position this year), Greece has started to
show improvements in a number of other areas, perhaps
indicating that the reform efforts are beginning to bear
fruit. Slight improvements are seen in the country’s
institutional environment, the efficiency of its labor
markets, and technological adoption, although continued
efforts in these areas are still needed. Although some
progress is being made, public institutions (e.g.,
government efficiency, corruption, undue influence)
continue to receive a poor evaluation (102nd) and
confidence has not returned to financial markets in the
country (138th). The country’s inefficient labor market
(127th) continues to constrain Greece’s ability to emerge
from the crisis, although this has improved somewhat
since last year, perhaps reflecting recent efforts to
increase both the retirement age and labor market
flexibility. In working to overcome its present difficulties,
Greece has a number of strengths on which it can build,
including a reasonably well educated workforce that
is adept at adopting new technologies for productivity
enhancements. With continued efforts toward growthenhancing reforms, there is every reason to believe that
Greece will continue to improve its competitiveness in
the coming years.
Asia and the Pacific
The competitiveness landscape in Asia and the
Pacific remains very mixed. The region is home to
some of the most competitive nations, including three
members of the top 10 (Singapore, Hong Kong SAR,
and Japan) and some of the most dynamic and rapidly
improving economies in terms of competitiveness,
such as Indonesia and the Philippines. On the other
hand, a number of Asian countries, including Pakistan
and Timor-Leste, have been unable to improve their
competitiveness. This year, we cover three new Asian
countries: Bhutan (109th), Lao PDR (81st), and Myanmar
(139th). With the latter two additions, the GCI now offers
a full coverage of the Association of Southeast Nations
(ASEAN) and its 10 members. Box 5 discusses ASEAN’s
competitiveness landscape and trends and the impact
the region’s deep competitiveness divide may have on
the planned ASEAN Economic Community.

Advancing one position, Taiwan (China) ranks
12th this year with a score of 5.3. Its performance
has been very stable and consistently strong over the
past five years. Notable strengths include the capacity
of Taiwanese businesses to innovate (8th), its highly
efficient goods markets (7th), and its world-class primary
education (9th) and higher education (11th). In order to
enhance its competitiveness, Taiwan will need to further
strengthen its institutional framework (26th), whose
quality is undermined by some inefficiency within the
government (28th) and various forms of corruption (30th),
and will also need to address some inefficiencies and
rigidities in its labor market (33rd).
This edition marks the first time that Australia
(21st, down one) exits the top 20 and is overtaken by
New Zealand (18th), which jumps five places. Australia
delivers a consistent—and essentially unchanged—
performance across the board, the highlight of which
is its 7th rank in the financial market development
pillar, the only pillar where it features in the top 10.
The country also earns very good marks for higher
education and training, placing 15th. Australia’s favorable
macroeconomic situation is improving further (25th, up
one place). Its budget deficit was reduced in 2012 and
inflation brought to under 2 percent, while the public
debt-to-GDP ratio, though on the rise, is the third lowest
among advanced economies, behind only Estonia and
Luxembourg. The main area of concern for Australia is
the rigidity of its labor market (54th, down 12), where
the situation has deteriorated further. Australia ranks
137th for the rigidity of the hiring and firing practices
and 135th for the rigidity of wage setting. The quality of
Australia’s public institutions is excellent except when it
comes to the burden of government regulation, where
the country ranks a poor 128th. Indeed, the business
community cites labor regulations and bureaucratic red
tape as being, respectively, the first and second most
problematic factor for doing business in their country.
Malaysia advances one position to 24th. Second
among ASEAN countries, behind Singapore, Malaysia
ranks no lower than 51st in any of the 12 pillars of the
GCI and features in the top 10 of two of them. Its most
notable advantages are its efficient and competitive
market for goods and services (10th), its well-developed
and sound financial market (6th), and its businessfriendly institutional framework (29th). In a region plagued
by corruption and red tape, Malaysia stands out as
one of the very few countries that have been relatively
successful at tackling these two issues, as part of its
economic and government transformation programs.
The country, for instance, ranks an impressive 8th for
the burden of government regulation, although the
score differential with the leader, Singapore, remains
large. Malaysia ranks a satisfactory 33rd in the ethics
and corruption component of the Index, but room for
improvement remains. Furthermore, Malaysia ranks 15th

Box 5: ASEAN’s competitiveness landscape: A mixed picture with encouraging trends
To any observer of the region, the developmental gap within
the Association of Southeast Asian Nations (ASEAN) is
striking. No other regional integration initiative has deeper
disparities among participating members. Founded in 1967 by
Indonesia, Malaysia, Singapore, Thailand, and the Philippines,
the subsequent accession of Brunei Darussalam, Vietnam,
Lao PDR, Myanmar, and Cambodia have made ASEAN’s
developmental landscape even more disparate. For example,
Singapore is 80 times richer than Myanmar, where infant
mortality rate is 25 times higher. Singapore’s population also
lives 20 years longer than Cambodia’s.
Despite this diversity, ASEAN has embarked on an
ambitious journey toward regional integration. The ASEAN
Economic Community (AEC) is one of the three pillars of this
integration effort, alongside the ASEAN Political-Security
Community and the ASEAN Socio-Cultural Community. The
AEC vision is for ASEAN to become, by 2015, a single market
and production base, a highly competitive economic region, a
region of equitable economic development, and a region fully
integrated into the global economy. Progress is real. By its
own account, ASEAN has implemented nearly 80 percent of
the measures set out in the AEC Blueprint of 2007. 1
Although it remains to be seen whether the AEC
vision will be fully realized by 2015, the fast-approaching
deadline should motivate ASEAN leaders, and boosting
competitiveness should be a priority. Competitiveness will
foster economic development, which in turn will reduce
disparities and accelerate regional and global integration—the
other goals of the AEC.
This year for the first time, with the inclusion of Lao PDR
and Myanmar, the Global Competitiveness Index (GCI) offers
a complete picture of ASEAN’s competitiveness landscape,
and it is a landscape that demonstrates much greater
contrast than exhibited in earlier GCI editions. Lao PDR
comes in 81st and Myanmar ranks 139th, some 50 places
behind Cambodia, which at 88th place is ranked second
lowest in ASEAN. Table 1 allows for a more granular analysis
of the GCI results by reporting the rank achieved by ASEAN
Member States in the overall GCI and its 12 pillars. The
different shadings allow for a ready identification of strengths
and weaknesses and of regional patterns. Plain white and
dark blue colors correspond to the 1st and 148th rank,
respectively.
The table reveals that Singapore is in a league of its
own. Malaysia performs consistently well, although room for
improvement remains. Myanmar is ASEAN’s lowest ranked
nation on all the pillars except market size. In technological
readiness, it even ranks last among the 148 economies
studied. The table also reveals that the competitiveness of
most ASEAN countries is still impeded by poor transport,
inadequate energy and communication infrastructures, low
enrollment rates and/or mediocre quality in education, and
low levels of technological readiness. With the exception
of Singapore and Myanmar, performance tends to be
inconsistent across the different pillars of the Index. Finally,
the macroeconomic environment (3rd pillar) is rather sound in
a majority of ASEAN countries, much more so than in many
troubled advanced economies. In fact, Brunei Darussalam—
an oil-rich economy—tops this pillar. More prudent and
sustainable macroeconomic management is probably one of

the positive consequences of the 1997 Asian financial crisis,
which created havoc across ASEAN nations and inspired
reforms.
All in all, the assessment is very mixed. Much remains
to be done for ASEAN to become a more competitive,
prosperous, and harmonious group. Although ASEAN
economies have enjoyed brisk economic growth over the past
decade, the foundations remain relatively shaky for a number
of countries. Yet there is reason for optimism.
First, since the 2006–2007 edition of the GCI, the
competitiveness trends for ASEAN have been overwhelmingly
positive, as seen in Figure 1, which depicts the evolution in
rank of selected developing Asian countries within a constant
sample of 118 economies. 2 The seven ASEAN members
(identified by solid blue lines) covered since 2006 have either
improved or maintained their standing over the eight-year
period to 2013. 3 Cambodia has leapfrogged 23 ranks, the
fourth largest gain within the entire sample. Indonesia and
the Philippines each progress 19 places. Indonesia posts the
biggest progression among the group of 20 major economies
(G20). It is all the more encouraging that these two nations are
also the most populous in ASEAN, accounting for more than
half of the group’s population. Furthermore, Singapore has
improved steadily from 8th in 2006 to 2nd in 2011—behind
Switzerland—and has retained its rank since then. Malaysia
and Thailand have slightly declined, losing four and five
places, respectively, but they have done so from a relatively
high base and both countries have progressed in the last
year. Meanwhile, Vietnam has seen important improvements
followed by similar declines—partly reflecting the fragility of its
economy—and now sits just one notch below its 2006 rank.
Second, in terms of competitiveness levels and
trends, the ASEAN nations fare much better than most
developing Asian nations, especially when compared with
South Asian Association for Regional Cooperation (SAARC)
countries (identified by solid black lines in Figure 1). With
the notable exception of Sri Lanka, which has gained 19
ranks, the historical performance of other SAARC countries
is disappointing. India has lost 15 places since 2006. The
Philippines, once 40 places behind, is now ahead of India,
and its rank differential with China—the other BRIC in the
region—is 29, up from just 8 in 2006. Meanwhile Pakistan,
the second largest country in South Asia, has slumped 28
positions, the fourth biggest decline out of all economies
in the sample, over the 2006–2013 period. Mongolia, like
Vietnam, exhibits erratic trends, owing to an unstable
macroeconomic environment and investment climate, and
posts a net loss of six places over the period.
Third, the fact that ASEAN membership spans the
entire development ladder and includes competitiveness
champions can benefit the less competitive countries in the
group. Indeed, there are many stories of member countries
successfully addressing key competitiveness issues in ways
that could be emulated by others. For instance, Singapore
is a competitiveness champion. Its administration is one of
the world’s least corrupt and most efficient. Malaysia has
been tackling excessive regulation as part of its Government
Transformation Programme, and the Philippines—where a
national competitiveness council was set up in 2006—has
made significant strides against corruption. Furthermore, a
(Cont’d.)

Table 1: Performance of ASEAN members in the 2013–14 GCI and the 12 composing pillars, rank out of 148 economies

29

29

38

33

12th pillar: Innovation

24

11th pillar: Business sophistication

Malaysia

10th pillar: Market size

2

9th pillar: Technological readiness

18

8th pillar: Financial market development

4th pillar: Health and primary education

2

7th pillar: Labor market efficiency

3rd pillar: Macroeconomic environment

3

6th pillar: Goods market efficiency

2nd pillar: Infrastructure

2

5th pillar: Higher education and training

1st pillar: Institutions

Singapore

Country/economy

INNOVATION AND
SOPHISTICATION
FACTORS

EFFICIENCY ENHANCERS

GLOBAL COMPETITIVENESS INDEX

BASIC REQUIREMENTS

1

1

2

7

34

17

9

10

25

6

51

26

20

25

2
46

Brunei Darussalam

26

25

58

1

23

55

42

10

56

71

131

56

59

Thailand

37

78

47

31

81

66

34

62

32

78

22

40

66

Indonesia

38

67

61

26

72

64

50

103

60

75

15

37

33

Philippines

59

79

96

40

96

67

82

100

48

77

33

49

69

Vietnam

70

98

82

87

67

95

74

56

93

102

36

98

76

Lao PDR

81

63

84

93

80

111

54

44

91

113

122

78

68

Cambodia

88

91

101

83

99

116

55

27

65

97

92

86

91

Myanmar

139

141

141

125

111

139

135

98

144

148

79

146

143

Worst

Median

Best

Rank out of 118 (inverted scale)

Figure 1: Evolution in GCI rankings, selected Asian countries

Rank change
since 2006

1

Singapore

+6

21

Malaysia
China
Thailand
Indonesia

–4
+6
–5
+19

Philippines
India
Sri Lanka
Vietnam

+19
–15
+19
–1

Cambodia

+23

41

61

81

101

2006–2007

2007–2008

2008–2009

2009–2010

ASEAN

2010–2011

SAARC

2011–2012

2012–2013

Mongolia
Bangladesh
Nepal

–6
–4
+2

Pakistan
Timor–Leste

–28
–2

2013–2014

Other

Source: World Economic Forum, The Global Competitiveness Report, various years.
Notes: The ranks are among the 118 countries covered in every edition since 2006–2007. SAARC = South Asian Association for Regional Cooperation.
(Cont’d.)

Box 5: ASEAN’s competitiveness landscape: A mixed picture with encouraging trends (cont’d.)
number of regional initiatives, launched in the 1990s following
the accession of less developed members and aimed at
reducing the developmental gap, have proven quite effective.
These include the Initiative for ASEAN Integration and the
Master Plan on ASEAN connectivity.
Although the responsibility for addressing the structural
issues described above lies primarily with national actors,
regional cooperation is critical. Efforts at the country and
regional levels are complementary and reinforce each other.
They enable Member States to leverage growth opportunities
and strengthen their respective competitive advantages to

for the quality of its transport infrastructure, a remarkable
feat in this part of the world, where insufficient
infrastructure and poor connectivity are major obstacles
to development for many countries. Finally, Malaysia’s
private sector is highly sophisticated (20th) and already
fairly innovative (25th). All this bodes well for a country
that aims to become a high-income, knowledge-based
economy by the end of the decade. Amid this largely
positive assessment, the government budget deficit,
which represented 4.3 percent of GDP in 2012 (103rd);
the low level of female participation in the workforce
(121st); and the still comparatively low technological
readiness (51st) stand out as some of Malaysia’s major
competitive weaknesses.
The Republic of Korea drops six positions to
25th. Its performance is uneven across the different
dimensions of the Index. Korea possesses a remarkably
sound macroeconomic environment (9th, second only
to Norway among OECD countries). The country also
boasts excellent infrastructure (11th) and educational
systems. Enrollment rates at all levels of education are
among the highest in the world (Korea has the highest
tertiary enrollment in the sample, with a 103 percent
gross rate of enrollment). These factors, combined with
the country’s high degree of technological adoption
(22nd) and relatively strong business sophistication
(24th), contribute to explaining the country’s remarkable
capacity for innovation (17th). However, Korea’s
assessment is considerably weakened by the average
quality of its public and private institutions (74th, down 12
positions), the extreme rigidity and the inefficiencies of
its labor market (78th), and its poorly functioning financial
market (81st). Korea falls sharply in those three areas,
and without tackling these issues decisively, the country
will not be able to close the competitiveness gap with
the three other Asian Tigers.24
China remains stable at 29th position this year.
The country posts small gains in certain areas of the
Index but loses ground in others, resulting in an overall

The ranking based on the constant sample of 118 countries differs
from the ranking of the 2013–2014 edition of the GCI, which
comprises 148 economies.

3

For the sake of readability, we refer only to the first year (e.g.,
2006 instead of 2006–2007) of the Index edition that corresponds
to the release year.

performance virtually unchanged since last year. China
leads the BRICS economies by a wide margin, well
ahead of South Africa (53rd), Brazil (56th), India (60th),
and Russia (64th).25 The Chinese institutional framework
is improving slightly (47th), but weaknesses—including
corruption (68th), security issues (75th), and low levels of
accountability (82nd) and ethical standards (54th) among
businesses—remain. In addition, problems endure in
those areas that are becoming increasingly important for
China as it becomes wealthier and can no longer rely on
cheap labor: its financial market (54th) is undermined by
the relative fragility of the banking sector; technological
adoption by firms (86th) and by the population at
large (79th) remains very low; and the efficiency of its
goods market (61st) is seriously undermined by various
barriers to entry and investment rules, which greatly limit
competition.
On a more positive note, China’s macroeconomic
situation remains favorable (10th). Inflation was back
down to below 3 percent in 2012 (from 5.4 percent the
previous year), the budget deficit is moderate, China’s
public debt-to-GDP ratio at 22.9 percent is among
the lowest in the world, and the gross savings rate
represents a staggering 50 percent of GDP. However,
this rate is probably too high in light of the need for
China to rebalance its economy away from investment
and toward more consumption. Although China receives
good marks in health and basic education (40th),
the assessment is more negative when it comes to
higher education (70th) because of China’s low tertiary
education enrollment, the average quality of teaching,
and an apparent disconnect between educational
content and business needs (54th). Finally, China’s
innovation capacity has been improving recently, but
much remains done for it to become an innovation
powerhouse.
Posting a one-notch gain for the second year in
a row, Thailand ranks 37th as a result of a very small
improvement in its performance, but the competitiveness

challenges remain considerable. Political and policy
instability, excessive red tape, omnipresent corruption
and clientelism, security concerns, low reliability and
high uncertainty around property rights protection
seriously undermine the quality of Thai public institutions
(85th). Poor public health (74th) and education, two
other critical building blocks of competitiveness, require
urgent attention. For instance, Thailand displays one of
the highest HIV prevalence rates outside Africa, while
enrollment in and the quality of higher education remain
abnormally low.
Turning to more sophisticated areas, which are just
as important given Thailand’s stage of development,
technological readiness remains low (78th) when
considering technologies beyond mobile telephony.
Only a quarter of the population accesses the Internet
on a regular basis, and only a small fraction does so at
broadband speeds, but the growth is rapid. On a more
positive note, Thailand ranks high on the macroeconomic
environment pillar (31st, its best showing among the 12
pillars) owing to a very favorable fiscal situation, its high
savings rate, an inflation rate under control at around 3
percent, and—in international comparison—a relatively
good debt-to-GDP ratio of about 44 percent in 2012. In
addition, the county continues to improve in the financial
development (32nd) and the market efficiency pillars
(34th), having progressed 17 and 10 places, respectively,
in the past four years. Room for improvement remains,
however, especially when it comes to promoting
domestic competition (60th).
After three years of gradual decline, Indonesia
(38th) bounces back, posting one of the largest
improvements in this year’s rankings. This positive
development will contribute to sustaining Indonesia’s
impressive growth momentum—GDP grew by 5.2
percent annually over the past decade. The country
progresses in 10 of the 12 pillars of the Index, but its
overall performance remains uneven. Indonesia improves
the most in the infrastructure pillar, where it leapfrogs
17 places to 61st. After years of neglect, Indonesia
has been boosting infrastructure spending to upgrade
roads, ports, water facilities, and power plants, and our
results suggest that these improvements have started to
bear fruit. The efficiency of its labor market (103rd) has
also improved considerably, although from a very low
base. Rigidities in terms of wage setting and hiring and
firing procedures, along with the weak participation of
women in the workforce (115th), continue to undermine
Indonesia’s performance in this pillar. But the quality of
public and private institutions is improving (67th, up 5),
with all indicators pointing in the right direction in this
category. In particular, Indonesia ranks a satisfactory
45th in government efficiency and 54th for undue
influence. The two main dark spots in this pillar remain
bribery (106th) and security (104th). The country’s
macroeconomic environment (26th) is characterized by

a very small deficit (equivalent to 1.3 percent of GDP)
and gross government debt representing 24 percent
of GDP (30th), an inflation rate that is low by historical
standards, and a savings rate exceeding 30 percent
of GDP. Turning to the more sophisticated drivers of
competitiveness, Indonesia’s technological readiness is
also improving (75th, up 10), led by the private sector,
which is increasingly aggressive in adopting the latest
technologies (51st, up 13). The use of ICTs by the
population at large remains comparatively low, but this is
spreading rapidly (84th, up seven). One of the few areas
where the situation has deteriorated is health (103rd). In
particular, the incidence of communicable diseases and
infant mortality rate are among the highest outside subSaharan Africa.
Advancing six positions, the Philippines ranks
59th overall. The trends are positive across most
dimensions of the Index. In the institutions pillar (79th),
the Philippines has leapfrogged over the past years.
The current government, which came into power in
2010, has made the fight against corruption an absolute
priority; corruption had historically been one of the
country’s biggest drags on competitiveness. There are
signs that these efforts are producing results: in the
ethics and corruption category, the country has jumped
from 135th in 2010 to 87th this year. A similar trend has
been observed in the government efficiency category
(75th) and elsewhere in the Index. But improvements
are coming from such a low base that the country
cannot afford to be complacent. For instance, transport
infrastructure has improved but remains in a dire state
(84th), especially with respect to airport (113th) and
seaport facilities (116th). Similarly, the labor market
has become more flexible and efficient over the years,
but the Philippines still ranks a low 100th. The recent
successes of the government in tackling some of the
most pressing structural issues are encouraging and
proof that bold reforms and measures can yield positive
results.
Down one position, India now ranks 60th,
continuing its downward trend that began in 2009. With
a GCI score essentially unchanged since then, India
has been overtaken by a number of countries. Once
ahead of Brazil and South Africa, it now trails them by
several places and is behind China by a margin of 31
positions, while Russia (64th) has almost closed the gap.
India continues to be penalized for its very disappointing
performance in the basic drivers underpinning
competitiveness, the very ones that matter the most
for India given its stage of development. The country’s
supply of transport, ICTs, and energy infrastructure
remains largely insufficient and ill-adapted to the needs
of the economy (85th), despite the steady improvement
that has been made since 2006. The Indian business
community repeatedly cites infrastructure as the single
biggest hindrance to doing business, ahead of corruption

and cumbersome bureaucracy. Notwithstanding
improvements across the board over the past few years,
very poor public health and education levels (102nd)
remain a prime cause of India’s low productivity. The
quality of higher education is better, but enrollment
rates at that level remain very low, even by developingcountry standards. Turning to the country’s institutions
(72nd, down two places), discontent within the business
community remains high about the lack of reforms and
the perceived inability of the government to push them
through. Public trust in politicians has been eroding since
2009 and has now reached an all-time low at 115th,
while bribery remains deeply rooted (110th). Indeed, India
has lost almost 30 ranks on this indicator since 2010.
Meanwhile, the situation has deteriorated further on the
macroeconomic front, with India now 110th in this pillar.
The inflation rate and public deficit-to-GDP ratio were
dangerously close to double digits in 2012, and the debtto-GDP ratio is the second highest among the BRICS.
Indeed, a March 2013 survey of sovereign debt analysts
reveals an increased risk of sovereign debt default over
the previous year. Another major concern is the country’s
low level of technological readiness (98th). Although
businesses adopt new technologies relatively promptly
(47th), penetration rates of fixed and mobile Internet
and telephony among the population remain among the
lowest in developing Asia. Furthermore, the situation
has worsened in terms of labor market efficiency (99th),
where the most salient problem remains the dismally
low participation of women in the workforce. With a
ratio women-to-men of 0.36 (137th), India has the lowest
percentage of working women outside the Arab world.
Up five positions, Vietnam ranks 70th, regaining
half of the ground it lost last year. This progression is
mainly the result of a slightly better macroeconomic
environment (87th, up 19 positions)—after jumping to
almost 20 percent, inflation was back to single-digit
levels in 2012—and improvements to the quality of
transport and energy infrastructures, albeit from a very
low base (82nd, up 13). Vietnam also advances in the
goods market efficiency pillar (74th, up 17), thanks
to lower trade barriers and a less heavy tax rate on
businesses. Despite these encouraging developments,
the foundation of Vietnam’s economy and prosperity
remain fragile. The country ranks no higher than 57th
in any of the pillars except the market size pillar (36th).
It loses ground in several areas of the Index, including
labor market efficiency (56th, down five) and financial
market development (93rd, down five). Another area
of concern is technological readiness (102nd, down
four): although new technologies are spreading among
the population, Vietnamese businesses are particularly
slow to adopt the latest technologies for their business
use (128th), thus forfeiting significant productivity gains
through technological transfer.

36 | The Global Competitiveness Report 2013–2014

Mongolia falls to 107th position this year, almost
entirely the result of a significant deterioration of its
macroeconomic environment (130th) as captured by
data from the IMF. In 2012, Mongolia’s budget deficit
doubled to 7 percent of GDP, inflation surged to 15
percent, the gross savings rate plummeted to 28 percent
of GDP, and public debt increased slightly. The country’s
performance in most other dimensions of the Index
remains stable, suggesting that a great deal remains
to be done for Mongolia to live up to its significant
economic potential. In order to create opportunities for
its citizens and build up the confidence of businesses
and investors, the country must urgently upgrade its
institutional framework (113th), develop its transport and
energy infrastructure (113th), improve the functioning and
efficiency of its goods markets (96th), establish clear
rules for foreign investment, and develop its fledgling
financial sector (129th).
Dropping a further nine places, Pakistan ranks
133th overall. Its performance continues to deteriorate
in some of the most critical and basic areas of
competitiveness. Pakistan’s public institutions (126th)
are crippled by inefficiencies, corruption, patronage, and
lack of property rights protection. The security situation,
already alarming, is worsening, with violence and
terrorism taking a huge toll not only on the population,
but also on businesses. The macroeconomic situation
is also worrisome (145th). In 2012, the public deficit
widened to near 10 percent of GDP, inflation remains
in double-digit territory, and the savings rate dwindled
to just 10 percent of GDP. Pakistan’s infrastructure
(121st)—particularly for electricity (135th)—remains in a
dire state. Moreover, the country displays some of the
lowest education enrollment rates in the world and basic
education is poor (137th). Pakistan’s competitiveness is
further penalized by the many rigidities and inefficiencies
of its labor market (138th, down eight), with female
participation in the labor force among the lowest in
the world (144th). Finally, the potential of ICTs is not
sufficiently leveraged in Pakistan, where access to ICTs
remains the privilege of a few (118th). On a slightly more
positive note, Pakistan does comparatively better in
the more advanced areas captured by the GCI. It ranks
67th in the financial development pillar, 85th business
sophistication pillar, and 77th in innovation.
Myanmar enters the rankings at 139th among
148 economies, right behind Timor-Leste (138th). After
decades of political and economic isolation, the March
2011 elections have brought profound changes to the
country. The government has embarked on an ambitious
process of reforms to improve the country’s economic
landscape and prospects, notably by leveraging
Myanmar’s extraordinary assets, which include an
abundance of natural resources, very favorable
demographics, and a strategic location at the heart of
Asia. Competitiveness is at the core of this strategy.

Indeed, the government’s Framework for Economic and
Social Reforms, which sets the policy priorities through
2015, mirrors the 12 pillars of the GCI, thus making the
Index a useful tool to monitor progress.
The country’s performance in the GCI confirms
that it is starting from a very low base and that the road
toward prosperity will be long and dauntingly arduous.
Myanmar owes its presence at the very bottom of the
GCI rankings to major weaknesses across the board.
The country ranks 111th or worse in 10 of the 12 pillars
of the Index, and is among the 10 worst performers in
seven pillars. The two exceptions are the market size
pillar (79th) and labor market efficiency pillar (98th).
Given the extent of the task ahead, and in order to
have the biggest impact in creating a more conducive
environment for business to flourish, Myanmar needs to
focus on the basic determinants of its competitiveness,
namely the institutional framework (141st), transport,
energy, and communication infrastructures (141st), health
and primary education (111th), and the banking sector,
as well as access to technology. Myanmar is among the
world’s least connected countries and ranks last (148th)
in the technological readiness pillar of the Index. There
are just 11 mobile subscriptions for every 100 population,
compared with 80 for developing Asia; only 1 percent of
the population accesses the Internet on a regular basis;
broadband access is almost nonexistent; and firms
are extremely slow at adopting technologies for doing
business (148th).
Latin America and the Caribbean
In 2012, Latin America and the Caribbean grew by 3
percent, a slower pace than in previous years. Despite
this moderate deceleration, the region has exhibited
resilience with a projected growth rate of 3 percent for
2013 and 3.4 percent for 2014, outperforming other
regions in the world, especially advanced economies. A
recovery in several export markets and robust internal
demand based on fairly good access to financing are
driving this growth.
Notwithstanding this positive economic outlook, the
region continues to suffer from low levels of productivity
and slow productivity growth rates.26 Overall, after a
few years of general improvement, the results of this
edition of The Global Competitiveness Report show that
most countries are stagnating in their competitiveness
performance. These results point to a certain exhaustion
of the traditional sources of competitiveness gains
utilized by several countries in past years. These gains
were based on sound macroeconomic management,
improvements in credit conditions, and, in certain cases,
better functioning of the goods, labor, and financial
markets.
In order to support the transition of Latin America
toward higher productivity levels, urgent actions will be
needed to improve the functioning of the institutions;

the quality of infrastructure; the allocation of production
factors through enhanced competition; and, very
importantly, the skills, technology, and innovation base.
This will require a series of overdue reforms that have
been repeatedly postponed, along with significant and
sustained investments to support the rapid economic
growth of the past years.
Chile, at 34th, one position down from last
year, remains the most competitive economy in Latin
America. The country owes this privileged position
to its traditional strengths: a strong institutional setup
(28th) with low levels of corruption (26th) and an efficient
government (18th); solid macroeconomic stability (17th)
with a balanced public budget and low levels of public
debt; and well-functioning markets with high levels of
domestic competition (32nd) and openness to foreign
trade (29th), which allows for an efficient allocation of
available resources. In addition, Chile has made great
efforts to develop ICTs, almost doubling its international
Internet bandwidth capacity from 20 to 40 kb/s per user
(43rd) over the past year and expanding its number of
Internet users (45th). Notwithstanding these strengths,
the lack of substantive progress in the recent GCI
rankings suggests a certain stagnation in the country’s
competitiveness model and the need to tap into new
sources of productivity gains in order to diversify its
economy and move toward higher-value-added activities.
Important weaknesses in the educational system,
notably in terms of its quality (74th)—especially in math
and science (107th)—do not provide companies with
a workforce with the necessary skills to upgrade their
production or embark on innovative projects. This, linked
to low innovation investments, especially in the private
sector (58th), result in an overall poor innovation capacity
(63rd), which can jeopardize Chile’s necessary transition
toward a knowledge-based economy.
After three years of sharp rises in the
competitiveness rankings, Panama consolidates its
position at 40th place as the most competitive economy
in Central America, and second in Latin America, behind
Chile. In the past year, Panama has continued to improve
its competitiveness edge by reinforcing its strengths. The
country has been relentlessly improving its infrastructure
(37th), with one of the best port (6th) and airport (5th)
networks, closely aligning with its overall economic
development strategy of becoming a major transport
hub for the region. Its financial market (16th) and an
assessment of its technological adoption (11th) are also
persistently improving, especially via foreign multinational
corporations setting up operations in the country. In
addition, Panama has also made progress in addressing
some of its most pressing challenges, notably in terms of
improving the quality of education, where it has moved
to 75th place from 112th last year. Notwithstanding
these positive dynamics, the country still faces important
challenges in terms of strengthening the functioning

of its institutions (66th), fighting corruption (80th) and
crime (115th), and improving trust in politicians (94th) and
the independence of the judiciary system (118th). Also
important will be to continue improving the quality of
education, notably in terms of math and science (114th),
which will be necessary in order to better develop local
technological capacity.
Despite a slight improvement in score, Barbados
falls three positions in the rankings to 47th place. This
drop is driven by the persistence of the credit crunch
that is hindering the capacity of local businesses to
finance their activities by raising new equity (92nd), loans
(89th), or venture capital (98th) to support innovative
projects. In addition, and closely related to this concern,
macroeconomic conditions (121st), although slowly
improving, are still worrisome, and the capacity to
innovate remains low (81st). On a more positive note,
Barbados continues to benefit from a fairly skilled labor
force thanks to a high-quality educational system (6th)
and high enrollment rates in secondary (23rd) and
tertiary education (33rd), well-functioning institutions
(30th), and solid infrastructure (24th).
Costa Rica continues to rise in the rankings this
year, improving three positions to 54th place. Although
the competitiveness profile of the country remains fairly
stable, slight improvements in its innovation capacity
(37th) have driven this progress. Overall, the country
continues to benefit from a fairly open economy (44th)
and strong institutions (50th), despite rising concerns
about the wastefulness of government spending (114th)
and fairly high costs associated with crime and violence
(106th). It also has a high-quality educational system
(20th) that provides a skilled labor force, as well as a
relatively high rate of technological adoption (36th) and
business sophistication (31st). Notwithstanding these
strengths, Costa Rica still suffers from poor transport
infrastructure (110th); difficulty in accessing finance,
either through equity (118th) or loans (106th), and from
an only moderate capacity to innovate (37th), which will
be crucial for the country’s economy to move up toward
higher-value-added activities.
Mexico depicts a stable competitiveness profile this
year, and is ranked 55th overall. The country continues
to benefit from a relatively stable macroeconomic
environment (49th), a sound banking system (30th), a
large and deep internal market allowing for important
economies of scale (11th), reasonably good transport
infrastructure (39th), and a number of sophisticated
businesses (55th), particularly for a country at its stage
of development. At the same time, under the political
consensus achieved through the Pacto for Mexico
agreements, the country has started to undertake
some important and long-overdue reforms in the labor
market and education. Moreover, further reforms in the
goods and service market intended to increase levels
of competition in key strategic sectors, notably in the

38 | The Global Competitiveness Report 2013–2014

energy sector, are foreseen before the end of the year.
A full and efficient implementation of these reforms after
a period of political transition is expected to improve
some of the most pressing challenges the country
currently faces in terms of domestic competition (100th),
a skills gap due to a poor-quality educational system
(119th), and labor market rigidities (99th). In addition, the
competitiveness agenda for Mexico must include actions
oriented toward strengthening the functioning of its
institutions, notably in the fight against corruption (99th),
and increasing the level of security (135th). To support its
transition toward higher-value-added economic activities,
it will be critical to foster the use of ICTs (83rd) and boost
its innovation capacity (75th), which remain low.
Brazil comes in at 56th place this year. A slight
deterioration in some of the macroeconomic indicators
(75th), a tightening of access to financing, and the lack
of sufficient progress in some of the most pressing
challenges the country faces has driven this drop. More
precisely, the functioning of institutions (80th), with
increasing concerns about government efficiency (124th),
corruption (114th), and low trust in politicians (136th)
persist as a source of concern. Moreover, the lack of
progress in improving the quality of overall infrastructure
(114th) and education (121st), coupled with an economy
fairly closed to foreign competition (144th), also hinder
Brazil’s competitive edge. Notwithstanding these
challenges, the country still benefits from important
strengths, especially its large market size and its fairly
sophisticated business community (39th), with pockets
of innovation excellence (36th) in many researchdriven, high-value-added activities. Going forward,
Brazil should not delay the necessary reforms to boost
its competitiveness, and should further leverage its
numerous and important strengths.
Peru remains stable at 61st place following a
strongly positive trend that led the country up in the
rankings more than 20 places in recent years. The
results suggest a consolidation of the competitiveness
profile of the country and a certain exhaustion of the
sources of competitiveness gains of the past years: a
very strong macroeconomic performance (20th) and
high levels of efficiency in the goods (52nd), financial
(40th), and labor (48th) markets, despite some rigidity
in the hiring and firing practices (129th). In order to
move forward and continue advancing up the rankings,
Peru will have to address some of its most long-lasting
challenges by strengthening the robustness of its public
institutions (124th) by increasing government efficiency
(107th), fighting corruption (109th), and improving
infrastructure (91st). In addition, poor educational quality
(134th) has generated a deep skills gap in the economy.
Coupled with a low capacity to innovate (106th) caused
by limited R&D investment (124th) and a weak scientific
research system (119th), this hinders Peru’s capacity to

diversify its economy and move up toward new, more
knowledge-rich activities.
As in the past two years, Colombia, at 69th
place, presents a very stable competitiveness profile
with results similar to those of previous editions of this
Report across all dimensions. The country continues to
exhibit very positive macroeconomic conditions (33rd),
with a balanced public budget, low levels of public debt
and inflation that is under control at around 3 percent,
financial services that are relatively sophisticated by
regional standards (52nd), a considerable market size
(31st), and fairly high levels of education enrollment
compared with those of other countries in the region.
Notwithstanding these strengths, Colombia continues
to suffer from weak institutions (110th) and considerable
corruption. The country’s low-quality transport
infrastructure (111th) is largely the result of a complex
topography. Moreover, despite the rapid economic
growth from high oil revenues in recent years, the need
to diversify its economy will require improving the quality
of the educational system (86th), which does not yet
respond to the productive needs of an increasingly
sophisticated business environment, and its innovation
capacity (83rd), which is pulled down by low private
R&D investment (73rd) and the poor quality of scientific
research institutions (95th).
Close behind Colombia, Ecuador at 71st place
improves by 15 places in the ranking. Major advances
in infrastructure development (79th), education quality
(62nd), and innovation (58th) have resulted in this
positive result, although these areas remain challenging.
In addition, despite a low country credit rating (121st),
Ecuador benefits from stable macroeconomic conditions
(44th) that has facilitated access to finance through
equity (54th) and loans (31st), allowing local companies
to undertake investment projects. In spite of this positive
trend, the country still faces significant challenges that
are hindering its competitiveness potential. Notably, the
functioning of institutions is still weak (92nd): concerns
about a lack of independence within the judicial system
(100th) create mistrust in the overall legal framework. The
inefficient functioning of the goods (106th), labor (111th),
and financial (89th) markets because of insufficient
competition, as well as high rigidities and mistrust in the
banking system, remain problematic.
In the bottom half of the rankings, we find a
series of Central and South American economies. In
Central America, Guatemala (86th) follows Panama
and Costa Rica in the subregional rankings. Despite
fairly well-functioning goods (66th) and financial (43rd)
markets, thanks to its openness to trade and a sound
banking system (17th), the country continues to suffer
from security-related and corruption costs that hinder
the functioning of institutions. In addition, the
combination of a poorly performing educational system
(35th) and a scientific (107th) and digital gap (106th),

even with increasing efforts to raise the information
technology profile of the country, persist in hindering the
national capacity to move toward higher-value-added
activities. El Salvador (96th) and Nicaragua (99th),
rising four and nine positions, respectively, thanks to
some improvements in their innovation capacity, albeit
from a low base, follow Guatemala, while Honduras
plummets 21 positions to 111th place.
In South America, Bolivia improves its
competitiveness performance by six notches to 98th
place, while Uruguay, Argentina, Paraguay (119th), and
Venezuela drop in this edition of the rankings.
Uruguay drops 11 positions to 85th place, the
result of a combined series factors that include a
deterioration in macroeconomic conditions (85th), with a
high inflation rate that is affecting the access to financing
in the country, restrictive labor conditions (139th), and
weaknesses in the quality of education (120th) and
capacity to innovate (88th). These latter factors are
gaining importance in Uruguay as the country moves
toward more advanced stages of development, where
the need for a skilled labor force and higher innovation
capacity become more crucial for increasing the
productivity of the national economy. Notwithstanding
these weaknesses, Uruguay continues to leverage its
strong and transparent institutional setup (36th) and its
fairly high degree of digital connectivity (46th), thanks
to the continued efforts to narrow the digital divide with
more advanced economies.
Continuing its fall of previous years, Argentina
drops 10 positions to 104th place. A persistent
deterioration across the board—notably in the
macroeconomic conditions (111th) that affect access
to financing (143rd) and in the institutional framework,
with one of the lowest scores in terms of corruption
(145th), government inefficiency (147th), and government
favoritism (146th)—have contributed to this disappointing
result. These factors, coupled with inefficient goods
(145th), labor (144th), and financial (133rd) markets offsets
the enormous potential the country has to offer. More
precisely, its relatively large market size (24th), with the
potential for important economies of scale and scope,
its decent digital readiness (62nd), and high university
enrollment (15th) of 75 percent are not being fully utilized
amid the negative framework conditions that hinder the
potential of the Argentine economy.
Venezuela, immersed in a deep macroeconomic
(143rd) and institutional (148th) crisis, drops eight
positions to 134th place. The country’s continued
deterioration in most of the dimensions analyzed—
notably the macroeconomic conditions, with a large
public deficit and inflation rates and very weak
institutions, with the poorest evaluation of government
efficiency, corruption, and judicial independence among
all countries—do not provide the right conditions
for companies to develop their economic activity. In

Box 6: Mineral resource abundance: Blessing or curse?
The availability of abundant natural resources, especially
minerals such as oil, gas, copper, and gold, has traditionally
been regarded as an important input into economic growth
and higher levels of prosperity in many economies. Many
oil- and gas-rich countries in the Middle East have benefited
from some of the highest gross domestic product per
capita in the world, for example. More recently, several Latin
American economies—including Chile, Colombia, and Peru—
have experienced rapid economic growth thanks to robust
demand for their mineral resources, even in a global context
of uncertainty.
However, an abundance of mineral resources does not
necessarily directly equate with higher rates of sustained
productivity and overall competitiveness, and thus with
rising prosperity in the long term. From the 17th century,
when a resource-poor Netherlands managed to flourish in
sharp contrast to gold- and silver-abundant Spain, to more
recent cases—such as the rapid economic development
of mineral-poor newly industrialized countries of Southeast
Asia, which stand in contrast to some oil-rich nations such
as Venezuela—history is full of examples where mineral
endowments have not proved to be a blessing for long-term
economic growth. Instead, such endowments have been a
curse that has held countries back from making investments
to support future, long-term economic development.
In the end, the relationship between mineral abundance
and levels of prosperity depends on the use that nations
make of the revenues accruing from mineral exports. Those
countries that use such revenues for current spending
rather than on productive investments will most likely not

addition, poorly functioning goods (148th), labor (148th),
and financial (135th) markets result in sub-optimal
allocation of available resources and hinder the strong
potential of a country with the particularly high university
enrollment (13th) of 78 percent.
The Middle East and North Africa
The Middle East and North African region continues to
be affected by political turbulence that has impacted
individual countries’ competitiveness. Economies
that are significantly affected by unrest and political
transformation within their own borders or those of
neighboring countries tend to drop or stagnate in terms
of national competitiveness. At the same time, some
small, energy-rich economies in the region perform
well in the rankings (see Box 6 on mineral resource
abundance). This underlines the fact that, contrary to the
situation found in previous energy price booms, these
countries have managed to contain the effects of rising
energy prices on their economies and have used the
window of opportunity to embark on structural reforms
and invest in competitiveness-enhancing measures.

40 | The Global Competitiveness Report 2013–2014

benefit from high growth rates in the long run. In those
countries, national investments are driven toward mineralextraction activities that affect the level of productivity
of other activities, such as manufacturing and services.
This leads to an increase in the country’s exposure to
fluctuations of mineral prices in international markets. In
order to avoid these negative effects, known in the academic
literature as the “Dutch disease,” countries should invest
their mineral revenues carefully in productive activities such
as infrastructure, education, and innovation. By doing so,
they will enhance their overall productivity and support a
progressive diversification of their economies, becoming more
resilient and ensuring more sustainable patterns of economic
growth.
One crucial factor that allows countries to effectively
channel mineral revenues toward productive investments is
the presence of strong, transparent, and efficient institutions.
The absence of corruption, along with high levels of
transparency and accountability and a strong commitment
to a long-term economic agenda that is based on steady
productivity gains and independent from the political cycle,
are necessary, if not always sufficient, conditions to ensure
that natural resources support long-term growth. Chile,
Norway, and the United Arab Emirates are examples of
countries that are managing their mineral revenues smartly.
These countries are creating national funds that avoid
overheating their economies and that invest in growthenhancing activities related to education and innovation, thus
supporting more diversification and preparing the ground for
longer-lasting and more sustainable economic growth.

Qatar reaffirms once again its position as the
most competitive economy in the region at 13th
position.27 The country’s strong performance in terms
of competitiveness rests on solid foundations made up
of a high-quality institutional framework (4th), a stable
macroeconomic environment (6th), and an efficient
goods market (3rd). Low levels of corruption and undue
influence on government decisions, high efficiency
of government institutions, and strong security are
the cornerstones of the country’s solid institutional
framework, which provides a good basis for heightening
efficiency. Going forward, as noted in previous editions
of this Report, reducing the country’s vulnerability to
commodity price fluctuations will require diversification
into other sectors of the economy and reinforcing some
areas of competitiveness. As a high-income economy,
Qatar will have to continue to pay significant attention
to developing into a knowledge- and innovation-driven
economy. The country’s patenting activity remains low
by international standards, at 60th, although some
elements that could contribute to fostering innovation are
in place. The government drives innovation by procuring
high-technology products, universities collaborate with

the private sector, and scientists and engineers are
readily available. To become a truly innovative economy,
Qatar will have to continue to promote a greater use
of the latest technologies (31st), ensure universal
primary education, and foster more openness to foreign
competition—currently ranked at 30th, a ranking that
reflects barriers to international trade and investment and
red tape when starting a business.
The United Arab Emirates moves up in the
rankings to take second place in the region at 19th.
Higher oil prices have buoyed the budget surplus and
allowed the country to reduce public debt and raise the
savings rate. The country has also been aggressive at
adopting technologies and in particular using ICTs, which
contributes to enhancing the country’s productivity.
Overall, the country’s competitiveness reflects the high
quality of its infrastructure, where it ranks a solid 5th, as
well as its highly efficient goods markets (4th). Strong
macroeconomic stability (7th) and some positive aspects
of the country’s institutions—such as strong public
trust in politicians (3rd) and high government efficiency
(9th)—round up the list of competitive advantages.
Going forward, putting the country on a more stable
development path will require further investment to boost
health and educational outcomes (49th on the health and
primary education pillar). Raising the bar with respect to
education will require not only measures to improve the
quality of teaching and the relevance of curricula, but
also measures to provide incentives for the population to
attend schools at the primary and secondary levels.
Saudi Arabia remains rather stable with a small
drop of two places to 20th position overall. The
country has seen a number of improvements to its
competitiveness in recent years that have resulted in
more efficient markets and sophisticated businesses.
High macroeconomic stability (4th) and strong, albeit
falling, use of ICTs for productivity improvements
contribute to maintaining Saudi Arabia’s strong position
in the GCI. As much as the recent developments are
commendable, the country faces important challenges
going forward. Health and education do not meet the
standards of other countries at similar income levels.
Although some progress is visible in health and primary
education, improvements are being made from a low
level. As a result, the country continues to occupy
low ranks in the health and primary education pillar
(53rd). Room for improvement also remains on the
higher education and training pillar (48th), where the
assessment has weakened over the past year. Labor
market efficiency also declines, to a low 70th position,
in this edition. Reform in this area will be of great
significance to Saudi Arabia given the growing number
of young people who will enter the labor market over
the next several years. More efficient use of talent—in
particular, enabling the increasing share of educated
women to work—and better education outcomes will

increase in importance as global talent shortages loom
on the horizon and the country attempts to diversify its
economy, which will require a more skilled and educated
workforce. Last but not least, although some progress
has been recorded recently, the use of the latest
technologies can be enhanced further (41st), especially
as this is an area where Saudi Arabia continues to trail
other Gulf economies.
Israel drops by one to place 27th in this year’s
GCI. The country’s main strengths remain its worldclass capacity for innovation (3rd), which rests on highly
innovative businesses that benefit from the presence
of some of the world’s best research institutions
geared toward the needs of the business sector.
Israel’s excellent innovation capacity, supported by the
government’s public procurement policies, is reflected
in the country’s large number of patents (6th). Its
favorable financial environment, particularly evident in
the ease of access to venture capital (8th), contributes
to making Israel an innovation powerhouse. Challenges
to maintaining and improving national competitiveness
relate to the need for the continued upgrading of
institutions (40th) and a renewed focus on raising the bar
in terms of the quality of education. If not addressed,
poor educational outcomes—particularly in math
and science (78th)—could undermine the country’s
innovation-driven competitiveness strategy over the
longer term. As in previous years, the security situation
remains fragile and imposes an increasingly high cost
on business (83rd). Room for improvement also remains
with respect to the macroeconomic environment (72nd),
where increased budgetary discipline with a view to
reducing debt levels (123rd) would help the country
maintain stability and support economic growth going
into the future.
Jordan loses four positions to 68th rank after a
significant improvement in the previous year. The drop
mainly reflects the country’s macroeconomic challenges.
The economic crisis resulted in wider fiscal deficits and
higher public debt levels that will undermine growth over
the medium term if they remain unaddressed. Boosting
growth over the longer term to levels that would
result in sustainable job creation will require Jordan’s
policymakers to address a number of challenges.
Stabilizing the macroeconomic environment should be
accompanied by growth-enhancing structural reforms.
According to the GCI, there is significant room for
improvement in boosting labor market efficiency (101st),
and the full potential of ICTs for improving productivity
has not yet been exploited (90th). Jordan could also
benefit from more openness to international trade and
investment, which would trigger efficiency gains in the
domestic economy as well as the transfer of knowledge
and technology. Tariff barriers remain high in international
comparison (108th) and regulatory barriers to FDI remain
in place (72nd). And although financing appears to

be more easily available than in many other countries
(Jordan comes in at 34th on ease of access to loans)
efforts to further stabilize the banking sector should be
continued (114th).
Tunisia places 83rd in this year’s Report. The
country’s positioning reflects the important challenges
Tunisia will have to tackle in order to put its economy
onto a sustainable growth path and resolve its daunting
unemployment problem. The country’s macroeconomic
fundamentals need to be brought back on track by
narrowing the budget deficit and further reducing
inflation. Ensuring that the labor market contributes
to more efficiently using talent is crucial to raising
competitiveness. The country currently ranks very low
at 132nd overall on the labor market efficiency pillar. At
the same time, financial markets do not efficiently fulfill
their role in providing the business sector with financial
means to grow. Moreover, the banking system needs to
be stabilized further to build trust and confidence, which
at present is ranked a low 129th.
Egypt drops by 11 positions to reach 118th place
in this year’s GCI. This assessment is likely influenced
by the country’s continued transition since the events
of the Arab Spring. The deteriorating security situation
and tenacious political instability are undermining the
country’s competitiveness and its growth potential going
forward. Although resolving political friction needs to
remain the priority as this Report goes to print, many
of the underlying factors that will be decisive about the
sustainability of the country and the cohesion of the
society over the medium to longer term are economic in
nature. Establishing confidence through a credible and
far-reaching reform program will be vital to the country’s
future and to realizing the considerable potential of
the country’s large market size and proximity to key
global markets. According to the GCI, three areas are
of particular importance. First, the macroeconomic
environment has deteriorated over recent years to
reach 140th position mainly because of widening
fiscal deficit, rising public indebtedness, and persisting
inflationary pressures. A credible fiscal consolidation
plan, accompanied by structural reforms, will be
necessary in order to maintain macroeconomic stability
in the country. This may prove difficult in times of
rising energy prices, as energy subsidies account for
a considerable share of public expenditure. However,
better targeting of subsidies could allow for fiscal
consolidation while protecting the most vulnerable.
Second, measures to intensify domestic competition
would result in efficiency gains and contribute to
energizing the economy by providing access to new
entrants. This, in turn, would make the country’s private
sector more dynamic, thereby contributing to job
creation. And third, making labor markets flexible (141st)
and more efficient (145th) would allow the country to
increase employment in the medium term.

42 | The Global Competitiveness Report 2013–2014

Sub-Saharan Africa
Sub-Saharan Africa continues its impressive growth rate
of close to 5 percent in 2012 (with similar projections
for the next two years), providing something of a
silver lining in an otherwise uncertain global economy.
Indeed, only emerging Asia registers higher growth.
Growth has largely taken place on the backs of strong
investment, favorable commodity prices, and a prudent
macroeconomic stance.
There are, however, some regional variations, and
in fact, in terms of underlying competitiveness, subSaharan Africa continues to reflect one of significant
regional variations in the GCI, ranging from Mauritius
(overtaking South Africa and coming in at 45th this
year) to the lowest ranked Chad at 148th. Economies
with closer ties to advanced economies, such as South
Africa, have not yet returned to pre-crisis growth rates.
More generally, sub-Saharan Africa as a whole trails the
rest of the world in competitiveness, requiring efforts
across many areas to place the region on a firmly
sustainable growth and development path going forward:
the region continues to register a profound infrastructure
deficit. In addition, sub-Saharan Africa overall continues
to underperform significantly in providing health and
basic education (only Mauritius and Seychelles rank
in the upper half of the rankings). Higher education
and training also need to be further developed. The
region’s poor performance across all basic requirements
for competitiveness stands in stark contrast to
its comparatively stronger performance in market
efficiency, where particularly the region’s middle-income
economies fare relatively well (South Africa, Mauritius,
and Kenya rank in the top 20 percent in financial market
development). Moving forward, technological uptake
continues to remain weak, with only three economies
(South Africa, Mauritius, and Seychelles) featuring in the
top half of the overall GCI rankings on this pillar.
Mauritius moves up by nine places this year to
45th place, becoming the highest ranked country in the
region. The country benefits from relatively strong and
transparent public institutions (39th), with clear property
rights, strong judicial independence, and an efficient
government (29th). Private institutions are rated as highly
accountable (14th), with effective auditing and accounting
standards and strong investor protection. The country’s
infrastructure is well developed by regional standards
(50th), particularly its ports, air transport, and roads.
Furthermore, notable improvements have taken place
in the areas of market efficiency. Financial markets have
deepened, lifting Mauritius’ rank up to 26th on the back
of improved access to different modes of financing and
financial services. This is further reflected in company
spending on R&D—which seems to be increasing, albeit
from low levels—thus somewhat enhancing Mauritius’
innovative capacity. Furthermore, the country boasts an
efficient goods market (25th) driven by greater foreign

prevalence and more competition. The labor market is
relatively flexible (55th), although the country does not
deploy its talent efficiently: Mauritius ranks 92nd in its
capacity to retain talent, and the share of women in the
labor force remains low at 118th. This is further reflected
in the low availability of scientists and engineers (102nd).
South Africa is ranked 53rd this year, overtaking
Brazil to place second among the BRICS. South Africa
does well on measures of the quality of its institutions
(41st), including intellectual property protection (18th),
property rights (20th), and in the efficiency of the legal
framework in challenging and settling disputes (13th
and 12th, respectively). The high accountability of its
private institutions (2nd) further supports the institutional
framework. Furthermore, South Africa’s financial market
development remains impressive at 3rd place. The
country also has an efficient market for goods and
services (28th), and it does reasonably well in more
complex areas such as business sophistication (35th)
and innovation (39th). But the country’s strong ties to
advanced economies, notably the euro area, make it
more vulnerable to their economic slowdown and likely
have contributed to the deterioration of fiscal indicators:
its performance in the macroeconomic environment
has dropped sharply (from 69th to 95th). Low scores
for the diversion of public funds (99th), the perceived
wastefulness of government spending (79th), and a more
general lack of public trust in politicians (98th) remain
worrisome, and security continues to be a major area
of concern for doing business (at 109th). Building a
skilled labor force and creating sufficient employment
also present considerable challenges. The health of the
workforce is ranked 133rd out of 148 economies—the
result of high rates of communicable diseases and
poor health indicators more generally. The quality of the
educational system is very poor (146th), with low primary
and tertiary enrollment rates. Labor market efficiency
is poor (116th), hiring and firing practices are extremely
rigid (147th), companies cannot set wages flexibly (144th),
and significant tensions in labor-employer relations exist
(148th). Raising educational standards and making the
labor market more efficient will thus be critical in view
of the country’s high unemployment rate of over 20
percent, with the rate of youth unemployment estimated
at close to 50 percent.
Rwanda is ranked 66th this year, retaining
its third place in the sub-Saharan African region.
As do the other comparatively successful African
countries, Rwanda benefits from strong and relatively
well-functioning institutions, with very low levels of
corruption (an outcome that is certainly related to the
government’s no-tolerance policy, and a good security
environment). Its labor markets are efficient, its financial
markets are relatively well developed, and Rwanda
is characterized by a capacity for innovation that is
quite good for a country at its stage of development.

The greatest challenges facing Rwanda in improving
its competitiveness are the state of the country’s
infrastructure, its low secondary and university
enrollment rates, and the poor health of its workforce.
Botswana moves up five places to 74th, taking
fourth spot in the region. Improvements are driven in
large part by a sounder macroeconomic environment.
Among the country’s strengths are its relatively reliable
and transparent institutions (34th), with efficient
government spending, strong public trust in politicians,
and low levels of corruption. Botswana’s primary
weaknesses continue to be related to its human
resources base. Educational enrollment rates at all levels
remain low by international standards, and the quality
of the educational system receives mediocre marks.
Yet it is clear that by far the biggest obstacle facing
Botswana in its efforts to improve its competitiveness
remains its health situation. The rates of disease in
the country remain very high, and health outcomes
are poor despite improvements in recent years. For a
middle-income country in transition to an efficiencydriven economy, the goods market must become more
efficient (92nd). Going forward, combined efforts across
all areas will be needed if the country was to reduce its
heavy dependence on the mining sector and to set its
economy on a more diversified growth path.
Seychelles ranks 80th overall, rounding out the
top five countries in the region. The country registers
a solid performance in the basic requirements for
competitiveness: It benefits from strong and wellfunctioning institutions by regional standards (45th), with
strong public trust in politicians (32nd) and a government
that is seen as efficient (37th). Infrastructure is also
relatively well developed (43rd) and the Seychelles do
well in regional comparison when it comes to health
and primary education (55th). As the country is now
approaching the innovation-driven stage of development,
it needs to lay the fundamentals for higher-value
added growth. This will require improvements in higher
education and training (79th) particularly in view of its
very low tertiary enrollment rates (2.6 percent), its weak
math and science education and limited availability of
research and training services (93rd).
Namibia reverses its downward trend of recent
years slightly, improving by two places to reach 90th
place. The country continues to benefit from a relatively
well-functioning institutional environment (48th), with
well-protected property rights, an independent judiciary,
and reasonably strong public trust in politicians. The
country’s transport infrastructure is also good by regional
standards (47th). Financial markets are reasonably
developed (39th) and buttressed by solid confidence
in financial institutions (21st), although their overall
assessment has weakened for three years in a row. In
order to improve its competitiveness, as in much of the
region, Namibia must improve its health and educational

systems. The country is ranked a low 123rd on the
health subpillar (down five places), with high infant
mortality and low life expectancy—the result, in large
part, of the high rates of communicable diseases. On the
educational side, enrollment rates remain low and the
quality of the educational system remains poor (124th).
In addition, Namibia could do more to harness new
technologies to improve its productivity levels (90th).
Kenya moves up by an impressive 10 places and is
ranked 96th this year on the back of greater confidence
in institutions (88th). The country’s strengths continue to
be found in the more complex areas measured by the
GCI. Kenya’s innovative capacity is ranked an impressive
46th, with high company spending on R&D and good
scientific research institutions that collaborate well with
the business sector in research activities. Supporting
this innovative potential is an educational system that—
although educating a relatively small proportion of the
population compared with most other countries—
gets relatively good marks for quality (44th) as well
as for on-the-job training (49th). The economy is also
supported by financial markets that are well developed
by international standards (31st) and a relatively efficient
labor market (35th). On the other hand, Kenya’s overall
competitiveness is held back by a number of factors.
Health remains an area of serious concern (121st), with a
high prevalence of communicable diseases contributing
to the low life expectancy of fewer than 58 years and
reducing the productivity of the workforce. The security
situation in Kenya also remains worrisome (131st).
Senegal comes in at 113th place this year. Although
the country’s institutions rank still relatively low at 82nd,
our data suggest an improvement across a range of
indicators since the 2012 elections, albeit from low levels.
Senegal also benefits from relatively efficient goods and
labor markets (59th and 65th, respectively), red tape to
start a business is low even in international comparison,
FDI faces relatively few barriers, and labor-employer
relations are reasonably good (57th). Moreover, Senegal
hosts good ports (47th), although all other modes of
transport require significant upgrades (95th overall). The
country’s competitiveness is further pulled down by the
poor health and basic education of its population (131st).
Indeed, only three out of four children receive primary
education, which is very low compared with its middleincome peers, and communicable diseases continue to
erode at the health of the general population.
Ghana declines this year to 114th in large part
as a result of a deterioration in its macroeconomic
indicators (reversing last year’s trend). With regard
to strengths, the country seems to be improving its
public institutions, which are already somewhat strong
by regional standards (up by five places to 70th), with
relatively high government efficiency (57th). In addition,
some aspects of its infrastructure are good for the
region, particularly the state of its ports, and its financial

44 | The Global Competitiveness Report 2013–2014

and goods markets are also relatively well developed
(52nd and 70th, respectively). On the other hand,
Ghana must do much more to develop and deploy
talent in the country. Education levels continue to trail
international standards at all levels, labor markets are
characterized by inefficiencies, and the country is not
sufficiently harnessing new technologies for productivity
enhancements (ICT adoption rates continue to be very
low).
Nigeria is ranked 120th this year. The country
continues to benefit from its relatively large market size
(32nd), which has the potential for significant economies
of scale and is an important factor for attracting
investment. Nigeria also benefits from an efficient labor
market, and the financial market has been recovering
gradually from the 2009 crisis. Yet efforts need to be
taken to diversify its economy into the non-oil sector
and increase long-term competitiveness. Institutions
remain weak (129th) with insufficiently protected
property rights, high corruption, and undue influence.
The security situation in the country, already seriously
worrisome, continues last year’s downward trend to
142nd. Additionally, Nigeria must continue to upgrade
its infrastructure (135th) as well as improve health and
primary education (146th). Furthermore, the country is
not harnessing the latest technologies for productivity
enhancements, as demonstrated by its low rates of ICT
penetration.
Tanzania is ranked 125th this year. Its institutions
have been deteriorating over the past years—although
government regulation is not seen as overly burdensome
(53rd), corruption has been worsening (106th) and
policymaking has become less transparent. In addition,
some aspects of the labor market—such as the country’s
strong female participation in the labor force (5th) and
reasonable redundancy costs—lend themselves to
efficiency. On the other hand, infrastructure in Tanzania
is underdeveloped (134th), with poor roads and ports
and an unreliable electricity supply (131st). And although
primary education enrollment is commendably high,
providing universal access, enrollment rates at the
secondary and university levels are among the lowest in
the world (at 134th and 138th place, respectively), while
the quality of the educational system needs upgrading.
A related area of concern is the country’s low level of
technological readiness (126th), with very low uptake
of ICTs such as the Internet and mobile telephony. The
basic health of its workforce is also a serious concern:
the country is ranked 125th in this area, with poor health
indicators and high levels of communicable diseases.
Côte d’Ivoire is ranked 126th this year. Like many
of its sub-Saharan peers, the country’s labor market is
relatively efficient (68th), a ranking that is primarily driven
by its high flexibility (36th). Furthermore, the country does
well in attracting FDI—prevalence of foreign ownership
is perceived as very high by the business community.

Going forward, however, critical challenges remain.
Institutional quality remains low (104th) despite a gradual
improvement over recent years, and infrastructure is
underdeveloped (107th). Moreover, the country does
not meet primary needs in terms of health and basic
education (142nd), ranking among the lowest 10
countries worldwide on the related pillar. Only 60 percent
of all children are enrolled in primary education, and the
burden of communicable diseases—particularly the high
incidence of malaria and HIV—weighs heavily on the
workforce. Furthermore, technological adoption is very
low across private users and the business sector, with
only 2 percent of the population using the Internet.
Ethiopia falls six places to 127th this year, facing
challenges across all pillars. The country ranks above
100th only for its market size (67th) and the quality of
its institutions (95th), although it should be noted that
the assessment of institutions has been falling over
recent years across almost all indicators, including
property rights, ethics and corruption, undue influence,
and government efficiency. Furthermore, the country’s
goods (136th) and labor markets (108th) seem to be
deteriorating, with more procedures and time required to
start a business along with increasing concerns about
the quality of labor-employer relations (121st), hiring and
firing practices (99th), and the alignment between pay
and productivity (125th). Ethiopia also requires significant
improvements in the areas of infrastructure (124th),
higher education and training (137th), and technological
readiness (139th). On a more positive note, security—
ranked 55th—is better than in many of its sub-Saharan
peers, primary education with a net enrollment rate of 87
percent is comparatively good (although the quality of
primary education is very low), and women account for a
high percentage of the country’s labor force.
Liberia ranks 128th in this year’s GCI. The country
features a well-developed goods and labor market by
regional standards (47th and 60th, respectively), with
few procedures and low cost to start a business in the
country, and a taxation regime that is not overly distortive
to economic decision making. In order to enhance its
competitiveness, Liberia must focus on improving its
physical infrastructure (131st) and enhancing human
resources by improving the health and education levels
of its workforce (144th).
Zimbabwe remains relatively stable at 131st
position. Public institutions continue to receive a
weak assessment, particularly related to corruption,
security, and government favoritism, although overall
the assessment of this pillar has improved somewhat
since a few years ago. Yet major concerns remain
with regard to the protection of property rights (137th),
where Zimbabwe is among the lowest-ranked countries,
reducing the incentive for businesses to invest.
And despite efforts to improve its macroeconomic
environment—including the dollarization of its economy

in early 2009, which brought down inflation and interest
rates—Zimbabwe still receives a low rank in this pillar
(114th), demonstrating the extent of efforts still needed
to ensure its macroeconomic stability. Weaknesses in
other areas include health (132nd in the health subpillar),
low education enrollment rates, and formal markets
that continue to function with difficulty (particularly with
regard to goods and labor markets, ranked 130th and
140th, respectively).
Mozambique ranks 137th this year, with efforts
required across many areas to lift the economy onto a
sustainable growth and development path, particularly
in view of its natural resource potential. The country’s
public institutions receive a weak assessment on the
basis of low public trust in politicians, significant red
tape faced by companies in their business dealings,
and the perceived wastefulness of government
spending. Macroeconomic stability is still weak (98th)
although recent efforts seem to be bearing some fruit in
containing price rises (inflation is down to 2 percent from
double-digits last year). Looking ahead, significant reform
will be needed to advance the country’s long-term
competitiveness, including making critical investments
across all modes of infrastructure (ranked 130th),
establishing a regulatory framework that encourages
competition to foster economic diversification, and
developing a sound financial market (132nd). Also critical,
in view of the country’s rapidly growing population and
high unemployment, are investing in the healthcare
system and primary education (138th) as well as higher
education and training (143rd).
Angola re-enters the GCI this year at 142nd place.
As with its oil-exporting peers, a positive fiscal balance
and low public debt contribute to a comparatively stable
macroeconomic environment (54th), but much remains
to be done across the board to build out the country’s
competitiveness. Given its favorable fiscal stance, the
country has a unique opportunity to invest revenues in
competiveness-enhancing measures. In this context,
its poor performance across all governance indicators
is worrisome: Both public and private institutions are
characterized by widespread corruption, and inefficient
government spending casts doubt on the country’s
ability to spend resource receipts in the most important
areas. Furthermore, the country’s infrastructure is one of
the least developed globally (145th), and its population
would be well served by improvements in the educational
and health systems (137th).
CONCLUSIONS
This chapter has presented and analyzed the results of
Global Competitiveness Index 2013–2014, a tool that
assesses the competitiveness of 148 economies across
all geographies and stages of development. The GCI
aims to capture the complexity of the phenomenon of
national competitiveness, which can be improved only

through an array of efforts in different areas that affect
the longer-term productivity of a country, which is the
key factor affecting economic growth performance of
economies.
Against the backdrop of the cautious and stillfragile global recovery, the results this year stress the
importance of competitiveness as a key dimension of
economic policymaking across all regions and stages
of development. The top 10 of the overall CGI rankings
are dominated by economies that display strong
institutions and ample innovative capacity, reflecting the
paramount importance of these elements. However, with
the rise of emerging markets, the distinction between
advanced and emerging economies is becoming more
and more blurred, as demonstrated by several emerging
markets that are higher in the rankings than advanced
economies.
Since its introduction in 2005, the GCI has been
used by a growing number of countries and institutions
to benchmark national competitiveness. The clear and
intuitive structure of the GCI framework is useful for
prioritizing policy reforms because it allows each country
to identify the strengths and weaknesses of its national
competitiveness environment and pinpoint those factors
most constraining its economic development. More
specifically, the GCI provides a platform for dialogue
among government, business, and civil society that can
serve as a catalyst for productivity-improving reforms,
with the aim of boosting the living standards of the
world’s citizens. Over the years, the GCI has proved
to be a very useful tool for advancing competitiveness
across countries.
NOTES
1 The first version of the Global Competitiveness Index was
published in 2004. See Sala-i-Martín and Artadi 2004.
2 Schumpeter 1942; Solow 1956; and Swan 1956.
3 See, for example, Sala-i-Martín et al. 2004 for an extensive list of
potential robust determinants of economic growth.
4 See Easterly and Levine 1997; Acemoglu et al. 2001, 2002; Rodrik
et al. 2002; and Sala-i-Martín and Subramanian 2003.
5 See de Soto 2000.
6 See de Soto and Abbot 1990.
7 See Shleifer and Vishny 1997; Zingales 1998.
8 See Kaufmann and Vishwanath 2001.
9 See Aschauer 1989; Canning et al. 1994; Gramlich 1994; and
Easterly 2002.
10 See Fischer 1993.
11 See Sachs 2001.
12 See Schultz 1961; Lucas 1988; Becker 1993; and Kremer 1993.
13 See Almeida and Carneiro 2009; Amin 2009; and Kaplan 2009
for country studies demonstrating the importance of flexible labor
markets for higher employment rates and, therefore, economic
performance.
14 See Aghion and Howitt 1992 and Barro and Sala-i-Martín 2003 for
a technical exposition of technology-based growth theories.

46 | The Global Competitiveness Report 2013–2014

15 A general purpose technology (GPT), according to Trajtenberg
(2005), is one that, in any given period, gives a particular
contribution to an overall economy’s growth thanks to its ability to
transform the methods of production in a wide array of industries.
Examples of GPTs have been the invention of the steam engine
and the electric dynamo.
16 See Sachs and Warner 1995; Frenkel and Romer 1999; Rodrik
and Rodriguez 1999; Alesina et al. 2005; and Feyrer 2009. The
case of the European Union illustrates the importance of the
market size for competitiveness. Although the reduction of trade
barriers and the harmonization of standards within the European
Union have contributed to raising exports within the region, many
barriers to a true single market, in particular in services, remain in
place and lead to important border effects. Therefore we continue
to use the size of the national domestic and foreign market in the
Index.
17 This is particularly important in a world in which economic
borders are not as clearly delineated as political ones. In other
words, when Belgium sells goods to the Netherlands, the national
accounts register the transaction as an export (so the Netherlands
is a foreign market for Belgium), but when California sells the
same kind of output to Nevada, the national accounts register
the transaction as domestic (so Nevada is a domestic market for
California).
18 See Romer 1990; Grossman and Helpman 1991; and Aghion and
Howitt 1992.
19 Probably the most famous theory of stages of development was
developed by the American historian W. W. Rostow in the 1960s
(see Rostow 1960). Here we adapt Michael Porter’s theory of
stages (see Porter 1990). Please see Chapter 1.1 of The Global
Competitiveness Report 2007–2008 (Sala-i-Martín et al. 2007) for
a complete description of how we have adapted Michael Porter’s
theory for the present application.
20 Some restrictions were imposed on the coefficients estimated. For
example, the three coefficients for each stage had to add up to
one, and all the weights had to be non-negative.
21 In order to capture the resource intensity of the economy, we use
as a proxy the exports of mineral products as a share of overall
exports according to the sector classification developed by the
International Trade Centre in their Trade Performance Index. In
addition to crude oil and gas, this category also contains all metal
ores and other minerals as well as petroleum products, liquefied
gas, coal, and precious stones. The data used cover the years
2005 through 2009. Further information on these data can be
found at http://www.intracen.org/menus/countries.htm.
All countries that export more than 70 percent of mineral
products are considered to be to some extent factor driven. The
stage of development for these countries is adjusted downward
smoothly depending on the exact primary export share. The
higher the minerals export share, the stronger the adjustment and
the closer the country will move to stage 1. For example, a country
that exports 95 percent of mineral exports and that, based on the
income criteria, would be in stage 3 will be in transition between
stages 1 and 2. The income and primary exports criteria are
weighted identically. Stages of development are dictated solely by
income for countries that export less than 70 percent minerals.
Countries that export only primary products would automatically
fall into the factor-driven stage (stage 1).
22 In practice, this applies to countries where the GDP per capita at
current market prices has, for the past five years, been above an
average of that of economies at the technology frontier. Countries
at the technology frontier are the 10 countries with the highest per
capita patenting activity according to Patent Cooperation Treaty
data.
23 We have retained the geographical classifications used in past
editions of the Report while changing the groupings in the country/
economy profiles. The groupings in the profiles are based on IMF
data, and use the IMF classifications.
24 The four Asian Tigers are Hong Kong SAR, Singapore, the
Republic of Korea, and Taiwan (China).
25 The BRICS countries are Brazil, Russia, India, China, and South
Africa.
26 Busso et al. 2012.

27 Qatar ranked 11th in the GCR 2012–2013. The drop in the
rankings reflects the higher weight put on innovation and
business sophistication this year, as Qatar is being assessed as
an innovation-driven economy. See methodology section of this
chapter for a description of the new criteria introduced.

Appendix:
Computation and structure of the Global Competitiveness Index 2013–2014

This appendix presents the structure of the Global
Competitiveness Index 2013–2014 (GCI). The numbering
of the variables matches the numbering of the data
tables. The number preceding the period indicates
to which pillar the variable belongs (e.g., variable 1.11
belongs to the 1st pillar and variable 9.04 belongs to the
9th pillar).
The computation of the GCI is based on successive
aggregations of scores from the indicator level (i.e.,
the most disaggregated level) all the way up to the
overall GCI score. Unless noted otherwise, we use an
arithmetic mean to aggregate individual variables within
a category. a For the higher aggregation levels, we use
the percentage shown next to each category. This
percentage represents the category’s weight within
its immediate parent category. Reported percentages
are rounded to the nearest integer, but exact figures
are used in the calculation of the GCI. For example,
the score a country achieves in the 9th pillar accounts
for 17 percent of this country’s score in the efficiency
enhancers subindex, irrespective of the country’s stage
of development. Similarly, the score achieved on the
subpillar transport infrastructure accounts for 50 percent
of the score of the infrastructure pillar.
Unlike the case for the lower levels of aggregation,
the weight put on each of the three subindexes (basic
requirements, efficiency enhancers, and innovation and
sophistication factors) is not fixed. Instead, it depends
on each country’s stage of development, as discussed
in the chapter. b For instance, in the case of Burundi—a
country in the first stage of development—the score
in the basic requirements subindex accounts for 60
percent of its overall GCI score, while it represents just
20 percent of the overall GCI score of Sweden, a country
in the third stage of development. For countries in
transition between stages, the weighting applied to each
subindex is reported in the corresponding profile at the
end of this volume. For instance, in the case of Algeria,
currently in transition from stage 1 to stage 2, the weight
on each subindex is 59.1 percent, 35.7 percent, and 5.2
percent, respectively, as reported in the country profile
on page 102.
Variables that are not derived from the Executive
Opinion Survey (the Survey) are identified by an asterisk
(*) in the following pages. The Technical Notes and

Sources section at the end of the Report provides
detailed information about these indicators. To make
the aggregation possible, these variables are converted
to a 1-to-7 scale in order to align them with the Survey
results. We apply a min-max transformation, which
preserves the order of, and the relative distance
between, country scores. c
Indicators that are followed by the designation
“1/2” enter the GCI in two different pillars. In order to
avoid double counting, we assign a half-weight to each
instance. d
Weight (%) within
immediate parent category

use of talent............................................... 50%
Pay and productivity
Reliance on professional management ½
Country capacity to attract talent
Country capacity to retain talent
Female participation in labor force*

The sample minimum and sample maximum are, respectively, the
lowest and highest country scores in the sample of economies
covered by the GCI. In some instances, adjustments were made
to account for extreme outliers. For those indicators for which a
higher value indicates a worse outcome (e.g., disease incidence,
government debt), the transformation formula takes the following
form, thus ensuring that 1 and 7 still corresponds to the worst and
best possible outcomes, respectively:

Local supplier quantity
Local supplier quality
State of cluster development
Nature of competitive advantage
Value chain breadth
Control of international distribution
Production process sophistication
Extent of marketing
Willingness to delegate authority
Reliance on professional management ½

(sum of scores on full-weight variables)
(count of full-weight variables)

f

NOTES
a Formally, for a category i composed of K indicators, we have:
K

indicatork

k=1

K

b As described in the chapter, the weights are as specified below.
Refer to Table 2 of the chapter for country classification according
to stage of development:
Stage of development
Factor-driven Transition
stage (1)
from stage 1
to stage 2

Efficiencydriven
stage (2)

Transition
from stage 2
to stage 3

Innovationdriven
stage (3)

GDP per capita (US$) thresholds*
<2,000

2,000–2,999 3,000–8,999 9,000–17,000

>17,000

Weight for basic requirements subindex
60%

40–60%

35–50%

40%

20–40%

20%

50%

50%

50%

10–30%

30%

Weight for innovation and sophistication factors subindex
5%

5–10%

10%

* For economies with a high dependency on mineral resources, GDP per capita is
not the sole criterion for the determination of the stage of development. See text
for details.
c Formally, we have:
6 x

(

+ 7

(sum of scores on half-weight variables)
(count of half-weight variables)

country score – sample minimum
sample maximum – sample minimum

)

h The competition subpillar is the weighted average of two
components: domestic competition and foreign competition. In
both components, the included variables provide an indication
of the extent to which competition is distorted. The relative
importance of these distortions depends on the relative size of
domestic versus foreign competition. This interaction between
the domestic market and the foreign market is captured by
the way we determine the weights of the two components.
Domestic competition is the sum of consumption (C), investment
(I), government spending (G), and exports (X), while foreign
competition is equal to imports (M). Thus we assign a weight of
(C + I + G + X)/(C + I + G + X + M) to domestic competition and a
weight of M/(C + I + G + X + M) to foreign competition.
i

Variables 6.06 and 6.07 combine to form one single variable.

j

For variable 6.14, imports as a percentage of GDP, we first apply
a log-transformation and then a min-max transformation.

k The size of the domestic market is constructed by taking the
natural log of the sum of the gross domestic product valued
at purchased power parity (PPP) plus the total value (PPP
estimates) of imports of goods and services, minus the total
value (PPP estimates) of exports of goods and services. Data
are then normalized on a 1-to-7 scale. PPP estimates of imports
and exports are obtained by taking the product of exports as a
percentage of GDP and GDP valued at PPP. The underlying data
are reported in the data tables section (see Tables 10.03, 6.14, and
10.04).
l

+ 1

In order to capture the idea that both high inflation and deflation
are detrimental, inflation enters the model in a U-shaped manner
as follows: for values of inflation between 0.5 and 2.9 percent,
a country receives the highest possible score of 7. Outside this
range, scores decrease linearly as they move away from these
values.

g The impact of malaria, tuberculosis, and HIV/AIDS on
competitiveness depends not only on their respective incidence
rates but also on how costly they are for business. Therefore,
in order to estimate the impact of each of the three diseases,
we combine its incidence rate with the Survey question on its
perceived cost to businesses. To combine these data we first
take the ratio of each country’s disease incidence rate relative to
the highest incidence rate in the whole sample. The inverse of
this ratio is then multiplied by each country’s score on the related
Survey question. This product is then normalized to a 1-to-7
scale. Note that countries with zero reported incidence receive a
7, regardless of their scores on the related Survey question. In the
case of malaria, countries receive a 7 if they have been classified
as non-endemic by the World Health Organization (WHO).

Weight for efficiency enhancers subindex
35%

)

e “n/appl.” is used for economies where the railroad network totals
less than 50 kilometers.

The size of the foreign market is estimated as the natural log of
the total value (PPP estimates) of exports of goods and services,
normalized on a 1-to-7 scale. PPP estimates of exports are
obtained by taking the product of exports as a percentage of GDP
and GDP valued at PPP. The underlying data are reported in the
data tables.

The concept of competitiveness aims at capturing
the economic development process as a necessary
condition for improved living standards. During most
of the post–World War II period, economic growth was
accompanied by an improvement in living conditions
for large parts of the world’s population. More recently,
toward the end of the last century, economic growth in
developing and emerging markets has helped millions of
people escape poverty.
Recent projections and studies point out that the
rates of progress seen in the past may not be sustainable
going forward.1 As income levels have risen and more
and more emerging markets have entered rapid growth
paths, pressures on the environment have become
more palpable and concerns over the distribution of
the benefits of economic progress within countries
have grown. This has led many to question whether the
prevalent growth model is sustainable over time.
The perception that economic growth is not
translating into the desired results for society at large
was given further support by the recent financial crisis
and the ensuing economic slowdown, which brought
social tensions to light. These manifested themselves in
multiple ways, including the events related to the Arab
Spring; the rise of unemployment in many Western
economies, particularly in segments of the population
such as the young and the less skilled; and increasing
inequalities of income and socioeconomic opportunities
in both Western countries and fast-growing Asian
economies. Diminishing economic prospects, sometimes
combined with demand for more political participation,
have also sparked protests in several countries including,
for example, the recent events in Brazil and Turkey.
At the same time, pressures on the natural
environment resulting from economic activity have grown
over recent decades. Pollution has increased and the
loss of biodiversity is more and more problematic, while
climate change and its unpredictable consequences
raise concerns. The world is also facing a progressive
scarcity of water, energy, and mineral resources, for
which demand continues to climb. Despite some efforts
to address these issues, the undesirable environmental
consequences of human activity are leading to a less
habitable world.
As a result, social and environmental sustainability
increasingly influence economic policy decisions and can
have an impact on economic performance. At the same
time, these challenges bring into question whether wellestablished ideas and models that take a narrow view of
economic growth and do not take into account the use
of natural resources or social concerns can still provide
adequate solutions. The relationships between these
challenges need to be better understood and measured
in order to inform policies that will set and achieve the
desired objectives, and in order to better track progress
toward higher levels of sustainable prosperity.

Box 1: Public-private collaboration to achieve sustainable competitiveness
The World Economic Forum is taking an important step
forward to inform the discussion on competitiveness by
creating a Competitiveness Repository. This new initiative
aims at bridging a knowledge gap in the current literature by
compiling relevant information about the content and process
of building public-private collaboration practices that have
improved competitiveness.
Public private collaborations have also been used to
reinforce environmental and social sustainability over the
last 20 years to achieve enduring results. For example,
areas such as health and education—two crucial pillars
of competitiveness and also of social sustainability—have
long been areas of multi-stakeholder collaboration. As early
as 1993, the World Health Organization recognized that
achieving health for all would require partnerships with the
private sector and civil society, and subsequently made
such partnerships part of the organization’s strategy.1
Nowadays, most international organizations systematically
include the private sector in their strategies. This approach
was evident at the latest United Nations Conference on
Sustainable Development, where heads of state recognized
that “[Sustainable Development] can only be achieved with a
broad alliance of people, governments, civil society and the
private sector, all working together to secure the future we
want for present and future generations.” 2
Achieving sustainable competitiveness requires
funding and expertise that cannot come from the public
sector alone—especially in the context of cash-strapped
governments and austerity measures. Involving the private
sector in a collaborative way (through shared visions and
deep engagement in planning and decision making) can have
many benefits:

1. Typically, the most obvious reason for involving the private
sector in environmental and social sustainability national
projects has been financial: it is a way for governments
to add investment to underfunded projects in public
infrastructure and services. For instance, the Green
Growth Action Alliance is a group that supports the
scaling-up in green infrastructure investment through the
collaboration of more than 50 leading financial institutions,
corporations, governments, and nongovernmental
organizations. 3 In Vietnam, the Alliance will support the
government’s efforts to transform the country’s agricultural
sector with the goal of delivering a 20 percent reduction
in emissions, a 20 percent reduction in poverty, and a 20
percent increase in growth.
2. In some sectors of the economy, initiatives can also
greatly benefit from the skills and expertise of the
private sector, which the public sector may lack. For
instance, in the context of water management (which,
beyond being an infrastructure matter, also has a strong
social and environmental impact), the responsibility
of providing water often rests solely with the Ministry
of Agriculture or a similar department. However, key
industries—such as food and beverage, mining and
metals, and energy—have developed skills and expertise
that can be used to ensure a more equitable and
sustainable use of water resources. The Water Resource
Group is an example of an innovative public-private
platform for collaboration that mobilizes stakeholders
from the public and private sectors, civil society, centers
of academic expertise, and financing institutions to help
governments manage the water sector sustainably in
support of their economic growth plans.4 In South Africa,
the Water Resource Group has led to improvement in
(Cont’d.)

COMPETITIVENESS AND SUSTAINABILITY
The relationship between some aspects of sustainability
and economic growth has been studied extensively
by academics, policy practitioners, and international
organizations.2 Public interest in sustainable development
has also increased over the past few decades, driven by
influential work such as the report Our Common Future,
which was published under the auspices of the United
Nations by the Brundtland Commission in 1987. In this
seminal report, sustainable development was defined
as “development that meets the needs of the present
without compromising the ability of future generations to
meet their own needs.”3 The breadth of the definition was
meant to capture the several dimensions of development
that go beyond the usual boundaries of economic growth
in order to include both the tangible and intangible
necessities of life. This initial concept mainly focused
on environmental aspects of development. However, it
has evolved significantly over time and today it is widely

54 | The Global Competitiveness Report 2013–2014

accepted that sustainability also includes an economic
and a social dimension.
Despite mounting interest in sustainable
development, the relationship between environmental
or social sustainability and national competitiveness has
been only marginally explored. So far, economists have
devoted most of their efforts to trying to understand
the way economic growth impacts the quality of the
environment or income distribution within a country and
vice versa. However, little is known about how these
aspects of sustainability relate to competitiveness and
productivity.
Against this background, the World Economic
Forum has engaged in a series of activities to expand
our knowledge about sustainability and its relationship
to competitiveness. More precisely, the Forum has
been at the forefront of the discussion on environmental
sustainability, working to shape the agenda by catalyzing
public-private platforms that help governments draw
on private-sector expertise to identify and implement

Box 1: Public-private collaboration to achieve sustainable competitiveness (cont’d.)
in the context of environmental regulations. Indeed, by
studying a series of examples, researchers from Harvard
University’s Kennedy School came to the conclusion that
regulations on environmental policies that are negotiated
with industries and citizens are more likely to be
successful in the long term. 7

effluent and wastewater management, water efficiency
and leakage reduction, and agriculture and supply chains.
3. Public-private collaboration might also allow the public
sector to reach remote communities. A recent
paper from the International Institute for Sustainable
Development highlights the importance of public-private
collaboration for sustainable development. Indeed, the
private sector’s involvement can help “deliver a range of
essential public services to even the most remote areas
and marginalized communities.” 5 For instance, in Nepal
the Public Private Partnership for Urban Environment
(PPUE) 6—a collaboration among the Federation of
Nepalese Chambers of Commerce & Industry, the
Municipal Association of Nepal, the United Nations
Development Programme, and the Asian Development
Bank—aims to boost the coverage and quality of basic
urban services to the urban poor while increasing the
participation of the local population in the process of
service delivery. The project has already supported
its partner municipalities to implement 88 projects
that demonstrate this way of providing services and
developing infrastructure. In 2010 and 2011, most of
the projects were in solid waste management, mobile
toilets, sewage-attached biogas, solar street lighting,
the management of recreational areas and city markets,
and building and operating slaughterhouses. Most of
these initiatives are improving the urban environment
and services for urban dwellers as well as providing new
employment for local residents by hiring them for the new
projects.
4. Finally, and very importantly, public-private collaboration
may contribute to long-term acceptance, especially

solutions to the most pressing issues. As a key
convening platform for the international community,
national policymakers, and business leaders, the World
Economic Forum has found itself at the center of the
discussion on the nature of the relationship between
competitiveness and sustainability. Issues of economic,
social, and environmental sustainability have been
showcased and discussed at many of the Forum’s
regional and annual meetings and, more recently, the
Forum has embarked on a new initiative to identify and
showcase public-private collaborations that can support
sustainable competitiveness, as described in Box 1.
In addition, the World Economic Forum—in
collaboration with a multi-stakeholder Advisory Board
of international experts (Box 2)—embarked on an
effort to integrate the concept of sustainability into its
competitiveness work. The results of our preliminary
work were released in last two editions of The Global
Competitiveness Report.

The Competitiveness Repository will continue to highlight
cases of public-private collaboration in the domain of social
and environmental sustainability and bring them into the
multi-stakeholder discussions that the World Economic Forum
regularly organizes at global and regional summits and at
targeted roundtables. The purpose of these discussions is to
catalyze action and commitment from different stakeholders.
Notes
1

For more information about the Green Growth Action Alliance, see
www.weforum.org/issues/climate-change-and-green-growth.

4

For further information about the 2030 Water Resources Group,
see www.2030wrg.org.

5

Colverson and Perera 2012, p. 21.

6

For information about the organization Public-Private Partnerships
for Urban Environment, see www.pppue.org.np.

7

Pande et al. 2012.

In this edition, we continue our ongoing efforts
to build a more robust narrative of the concept of
sustainable competitiveness. These efforts aim to
better understand the complex relationship between
competitiveness and sustainability and to provide a
working definition of the concept, thereby contributing
to the intellectual debate. The chapter also updates the
results for the preliminary measurement of sustainable
competitiveness, the sustainability-adjusted Global
Competitiveness Index, which was introduced for
discussion in last year’s edition of this Report.
The sections that follow explore the relationships
among competitiveness, environmental sustainability,
and social sustainability. The discussion will provide the
building blocks to explain how we have arrived at the
overall definition of sustainable competitiveness, which
is the set of institutions, policies and factors that make
a nation remain productive over the longer term while
ensuring social and environmental sustainability.

In addition to frequent consultations with the Advisory
Board (including a face-to-face meeting in Dubai in November
2012 during the Summit on the Global Agenda), The Global
Competitiveness and Benchmarking Network team regularly
consults with international experts in order to ensure that our
work on sustainable competitiveness remains at the forefront
of the research in this domain. Accordingly, in the last 18
months, three workshops were organized to:
1. Define sustainable competitiveness and review the
rationale for the social pillar. This workshop was held in
Geneva in April 2012 with experts from the World Health
Organization, the United Nations Economic Commission
for Europe, the International Labour Organization, and the
International Organization for Migration.
2. Review the concept of environmental sustainability and
discuss how it can be measured in our context. This
workshop was held in New York in September 2012 with
experts from the Center for International Earth Science
Information Network at Columbia University, the United
Nations Sustainable Development Department, the World
Bank, and Zurich Insurance.
3. Discuss the impact that social and environmental
sustainability have on one another. This workshop
was held in Geneva in April 2013 with experts from
the World Health Organization, the International
Labour Organization, the United Nations Development
Programme, the United Nations Environment Programme,
the United Nations Research Institute for Social
Development, the Overseas Development Institute,
the Organisation for Economic Co-operation and
Development, Deloitte, and KPMG.
In the upcoming year, The Global Competitiveness
and Benchmarking Network team will hold further multistakeholder consultations in order to strengthen the relevance
of the Sustainable Competiveness Project.

Two new members joined the Advisory Board in the
course of the past year:
Lindene Patton, Chief Climate Product Officer,
Zurich Insurance Group, Ltd., Switzerland
Anthony O’Sullivan, Head Private Sector Development,
Organisation for Economic Co-operation and
Development (OECD), France

Competitiveness and environmental sustainability
For decades, economists, strategists, and business
leaders were skeptical about the compatibility between
environmental goals and industrial competitiveness.4
In most of the macroeconomic literature,5 nature has
traditionally been regarded as a constraint. Because
natural resources on the planet are either limited or they
renew at a specific physical rate, they are usually viewed
as a major source of “limits to growth.”6 Consequently,
natural resources are modeled as an additional input
in the production process or as an additional cost that
must be incurred to abate unwanted byproducts such

56 | The Global Competitiveness Report 2013–2014

as pollution. Another limitation to growth, according to
this strand of literature, can be traced back to nature’s
decreasing ability to dissipate waste from production as
pollution accumulates. Once pollution reaches a critical
limit, ecosystems will not be able to function properly
and cannot absorb additional waste from production.
Although environmental limitations to growth are
important, empirical evidence of development dynamics
shows that the state of the environment tends to worsen
at the initial stages of industrialization but to then improve
as income increases—a concept known in the literature
as the Environmental Kuznets Curve.7 Many advanced

economies have adopted pollution control measures that
have improved the state of the natural environment, yet
this should not lead to the conclusion that environmental
sustainability will be automatically achieved at a certain
income level.8 In order to preserve future generations’
ability to benefit from nature’s resources and services
and increase standards of living, policies and measures
that ensure an efficient use of natural resources as
well as the adoption of clean industrial processes are
significant.9
Taking into account all aspects described above,
it emerges that the relationship between environmental
sustainability and competitiveness is multifaceted and
affects an economy in different ways. Multiple channels
support a positive relationship between environmentally
sustainable practices and productivity gains. Here we
identify and describe the main ones:
• Efficient use of natural resources. The efficient
use of natural resources includes both managing
exhaustible raw materials and using renewable
resources within their regenerative capacity in order
to minimize production costs, ensure the legacy
for future generations, and reduce pollution. As
described by the literature on public goods, welfare
increases once the negative externality generated by
pollution is corrected.10 It follows that environmental
sustainability can bring about a better economic
outcome if it is associated with formal or informal
institutions that define property rights and result in
the adoption of sustainable processes over the use
of scarce resources.
• Improved health. A high-quality natural environment
improves the productivity of the workforce by
reducing health damage caused by pollution or
environmental degradation. According to some
studies,11 in the Asia Pacific region alone about
2.5 million people die every year because of air
pollution, unsafe water, and poor sanitation, creating
a vicious circle of poverty, low-quality environmental
conditions, and dismal economic performance.
Since health affects productivity and pollution
affects health, efforts to reduce pollution may be
interpreted as an investment in human capital.
Recent empirical evidence has indicated that, in the
United States, ozone levels below federal air quality
standards have a positive impact on productivity (a
10 parts per billion decrease in ozone concentrations
raises worker productivity by 4.2 percent).12 Finally,
environment-driven health problems lead to resource
misallocation, forcing governments to fund additional,
and otherwise unnecessary, health programs and
diverting resources that would otherwise go into
productivity-enhancing investments in, for example,
education or innovation.

• Biodiversity for innovation. Ultimately,
environmental degradation can impact the
way ecosystems work and reduce biodiversity.
Biodiversity supports the productivity of the
workforce by providing food, fiber, shelter, and
natural medicines, and it regulates the water
supply and air quality. According to the Convention
on Biodiversity,13 more than 1.3 billion people in
the world depend on biodiversity and on basic
ecosystem goods for their livelihoods. Biodiversity
losses caused by deforestation or significant landuse changes—which today are estimated to be
100 to 1,000 times greater than is considered
to occur naturally—increase the vulnerability of
terrestrial and aquatic ecosystems and induce
changes in climate and ocean acidity.14 Biodiversity
is also a key driver of economic growth, especially
in developing countries, because it provides
the basis for many innovations in areas such as
pharmaceutical or cosmetic products. At the same
time, interfering with ecosystems may make living
conditions for humans more difficult and perhaps
engender additional costs. Last but not least,
biodiversity restoration and protection can create
profitable business opportunities, incentivizing the
development of new technologies and products for
their utilization, in still-unexplored markets.15
In addition to these general sources of potential
competitiveness gains for an economy, environmental
sustainability can have more marked impacts in
particular economic sectors such as agriculture,16
fishery, and forestry. More precisely, in the absence of
any technological change, a reduction in the cultivable
area for staple crops would lead to a decrease in overall
production, an increase in the price of staples, a fall in
consumption, and widespread malnutrition. According
to United Nations Environment Programme (UNEP)’s
Green Economy Report, green agriculture is capable
of nourishing a growing world population at higher
nutritional levels, switching from today’s 2,800 Kcal
availability per-person per-day to around 3,200 Kcal by
2050. Furthermore, investing in the greening of tourism
can reduce the cost of energy, water, and waste and
thus enhance the value of biodiversity, ecosystems,
and cultural heritage.17 A degraded environment would
reduce tourist inflows, which increasingly depend on the
quality of a country’s environment.18
Finally, human activities that are respectful of
the environment help to reduce the likelihood of
extreme weather events such as floods, windstorms,
and droughts. Natural disasters negatively affect the
competitiveness of an economy by impacting the life and
health of the local workforce and by diverting available
resources from productivity-enhancing investments,
such as education or innovation, for rescue and

reconstruction purposes. At the same time, disasters
destroy tangible assets such as infrastructure, public
facilities, and industrial stocks, and they interrupt the
regular flows of goods and services both within and
between countries. According to an estimate of the
2007/2008 UN Human Development Report, to reach the
Millennium Development Goals by 2015, the additional
cost associated with coping with more a hostile climate
will amount to approximately US$85 billion per year. An
example is the unprecedented floods in Thailand in 2011,
which, according to the World Bank, cost its economy
US$45 billion and triggered the disruption of many global
supply chains.19 Also in 2011, China experienced its
worst drought in 50 years, with over 4 million farmers
facing severe water shortages. And recent floods in
the Philippines have claimed at least 1,500 lives, with
corresponding negative impacts to infrastructure and
land.
In terms of empirical evidence, a body of
research supporting the positive relationship between
competitiveness and environmental sustainability is
slowly emerging. Jaffe and Palmer (1997) suggest
a positive relationship between the intensity of
environmental regulation and innovation as measured
by the amount of R&D expenditure,20 which contributes
to productivity, at a country level. In the Green Economy
Report,21 the UNEP argues that a green economy,
which invests a considerable amount of resources in the
preservation of the environment and in the restoration
of natural capital, tends to grow faster than a brown
economy, which underinvests in natural capital and
overinvests in activities that cause its degradation.
Moreover, over the longer term, the green growth path
starts off lower than the brown one but eventually
surpasses it, when environmental damage begins to
constrain growth. In this context, green growth leads
to higher energy and resource efficiency, reduces
greenhouse gas emissions, enhances ecosystem
services, and creates additional jobs in the medium term.
At the firm level, the impact of environmental
standards on productivity has become more and more
controversial. Some recent studies suggest that the
relationship between higher environmental standards and
productivity could be positive, contrary to the traditional
analysis that finds this relationship to be negative. For
instance, refineries in the Los Angeles area of California,
where environmental regulation tended to be stricter than
in other US states, have enjoyed higher productivity than
refineries located elsewhere in the country. Other studies
on the Mexican food-processing industry have found
that productivity is positively correlated with the intensity
of environmental regulation.22
Based on the analysis and the relationship between
different elements of environmental sustainability and
competitiveness, we define environmentally sustainable
competitiveness as the institutions, policies, and factors

58 | The Global Competitiveness Report 2013–2014

that ensure an efficient management of resources to
enable prosperity for present and future generations.
Competitiveness and social sustainability
The body of research on social sustainability is growing,
but remains limited. Because of the sometimes intangible
nature of the social dimension of growth that is often the
result of deliberate political choice, the concept of social
sustainability tends to be under-theorized.23 The social
dimension of development, which had been considered
in works such as the recommendations from the StiglitzSen-Fitoussi Commission and by the Brundtland Report,
has only recently gained greater recognition both in
academic and policymaking circles.
Overall, there is no widely accepted definition of
social sustainability. Each branch of social science tends
to approach it from a different perspective, applying
different criteria. However, it is possible to identify
recurring themes in the different definitions that have
been proposed so far. Human rights, equity, and social
justice are among the most relevant.
Both the theoretical underpinnings of the
relationship between social sustainability and
development and empirical evidence to support such a
theory remain somewhat unclear, although a series of
recent events in different parts of the world seems to
suggest that an unbalanced social model can undermine
the stability of the growth process for both current and
future generations. The recent wave of protests in Brazil,
the several chapters of social revolts in the Arab World,
and the Occupy Wall-Street Movement in the United
States are some examples of how, if economic benefits
are perceived to be unevenly redistributed within a
society, riots or social discontent can affect the capacity
of individuals to contribute to and benefit from higher
rates of economic growth.
In what follows, we will individually analyze those
dimensions of social sustainability that are likely to fuel
productivity and long-term prosperity while at the same
time preserving social stability. Our aim is to unbundle
the most relevant elements, even if they are often
interrelated and not always clearly distinct:
• Inclusion. An inclusive social system ensures
that all citizens contribute to and benefit from the
economic prosperity of their country. Inclusion is a
prerequisite for social cohesion because, if some
members of the community are marginalized, the
society will lack the necessary coherence of goals
to accomplish common purposes. Typical examples
of social exclusion that have a considerable negative
impact on the competitiveness of a nation are the
lack of access to basic necessities, discrimination
according to gender, youth marginalization,
and extreme polarization of income. Any type
of social exclusion that prevents people from

fully participating in the labor market reduces
the availability of talent to a country’s firms and
organizations, thereby reducing competitiveness.
Lack of access to sanitation, drinkable water, or
healthcare can dramatically impair labor productivity,
reducing the ability of the economy to compete
globally. At the same time, when young people are
marginalized by the labor market and have access
only to short-term and highly volatile jobs, they
remain vulnerable, especially during downturns.
These workers usually receive less on-the-job
training than their counterparts in stable positions,
with a reduction in the overall level of human capital.
Finally, the participation and empowerment of
women is key to ensuring a large talent pool and
tends to bring about other positive effects, such
as reducing infant mortality, reducing poverty,
improving the management of scarce resources,
reducing conflict, and guaranteeing food security.24
• Equity and cohesion. An equitable society
guarantees the same opportunities to its members,
rewarding them according to their talents and fairly
redistributing the benefits of growing wealth,25
creating a cohesive society with no excessive
income disparities across different groups.
Inequality is a multidimensional concept. For the
purposes of this Report we are mainly interested in
income inequality, which certainly represents one
of the biggest challenges for policymakers globally
and which is highly correlated with access to other
opportunities. According to the literature,26 some of
the main arguments suggesting that inequality may
be harmful for growth are, first, that it can potentially
distort the political process; second, it could
suppress aggregate demand; third, it requires more
redistributive efforts, thus potentially introducing
more market distortions; and, finally, it may trigger
economically harmful social tensions, especially in
the context of a weak institutional setup. Persistent
inequalities tend to limit upward social mobility,
preventing gifted and hard-working individuals from
being rewarded according to their talents. However,
it can be argued that some degree of disparity—
provided it is not driven by rent positions—is actually
beneficial for growth because it incentivizes people
to invest in education, work harder, and be more
innovative and productive.
• Resilience. A social system is resilient when it
can absorb temporary or permanent shocks and
adapt to quickly changing conditions without
compromising its stability. Formal or informal
institutions usually perform the role of shock
absorber, reducing the vulnerability of the society
as a whole. In advanced economies, welfare states
promote the economic and social well-being of the

society by protecting its members from excessive
loss of income during old age and during periods of
unemployment or illness. Although welfare systems
represent a source of stability for the economy, they
can turn into a hurdle for its competitiveness since
overly generous social security programs increase
labor costs, can undermine the stability of public
finances and limit macro-stabilization policies, and
can hamper the incentives to work, innovate, and
excel. In order to be sustainable, a social protection
system needs to be well balanced and affordable.
The resilience of a social system also depends
on the features of its labor market and on the
extent of the black economy. When workers have
access only to short-term contracts or vulnerable
employment, they are exposed to negative shocks
and to all the costs associated with unemployment.
Moreover, a widespread black economy may affect
the resilience of a social system, since informal
workers are more vulnerable to concerns related to
job loss, old age, maternity, disability, or illness.
Based on the above analysis, our definition of social
sustainability is the institutions, policies, and factors that
enable all members of society to experience the best
possible health, participation, and security; and that
maximize their potential to contribute to and benefit from
the economic prosperity of the country in which they live.
Relationship between environmental and social
sustainability
The third and final relationship we would like to explore is
the one between environmental and social sustainability.
The quality of the environment and the structure of a
society are strictly correlated. On the one hand, wellmanaged natural resources increase the quality of
life, reduce tensions within and between generations,
provide better opportunities to the whole community,
and improve the resilience of the society. Moreover, the
management of natural resources might translate into
“in-kind” income distribution, as resource scarcity may
leave the poorest of the population unable to access
basic necessities. On the other hand, widespread
prosperity, which facilitates a high quality of life, requires
a functioning economy that, by definition, uses natural
resources. For this reason, although the academic
literature tends to focus on these two dimensions
individually, the World Economic Forum is interested in
exploring the way environmental and social sustainability
interact with one another. In this chapter, we focus on
selected channels that have been extensively highlighted
by the literature:
• Health and environmental degradation. As
discussed in the previous section, a degraded
environment negatively affects the health, and thus
the productivity, of the workforce. It also reduces

the overall quality of life of members of the society.
Each year, air pollution, unsafe drinking water,
and exposure to chemical products contribute
to a number of often-lethal diseases both in the
developed and developing world. According to
the Organisation for Economic Co-operation and
Development (OECD),27 unsafe water supplies, lack
of sanitation, and poor hygiene are responsible for 3
percent of all deaths worldwide, of which 90 percent
are children. An unhealthy environment dampens
economic opportunities, prevents people from
participating in the life of the community, diverts
resources from productive uses, and contributes to
urban decline.
• Demography, poverty, and the environment.
The relationship between demography and
environmental/social sustainability is extremely
intricate. Rapidly growing populations might
be a source of environmental stress, leading
to greenhouse gas emissions, high rates of
soil erosion, and the extinction of species. If
rapid population growth is not accompanied by
environmental management, it can give rise to
tensions between groups for the control of scarce
resources and can therefore be a source of further
social instability, creating a vicious circle. Persistent
poverty may also affect the environment and may
lead to massive unplanned urbanization, such as
slums, where large segments of the population
are without access to basic services. Such living
conditions can have significant repercussions on
the environment, including damage via deforestation
and the pollution of water resources as a result of a
lack of waste management.
• Energy and social stability. The consumption
of carbon-based fuel is one of the major causes
of global warming. According to the International
Energy Agency,28 in order to limit the rise of global
temperature to 2°C, a number of measures need
to be adopted to limit greenhouse gas emissions;
these measures would consequently reduce the
demand and therefore also the price of oil and gas.
A study by HSBC estimates that a drop in demand
of fossil fuel could cause the price of oil to remain
below US$50 per barrel.29 This would mean that
only a third of current fossil fuel reserves would be
burned before 2050 because the cost of extraction
would overweigh the associated value. Reduced
volumes and lower values for fossil fuel would
impact the stock value of extractive companies
and tax revenues from fossil fuel–related levies.
Consequently, public revenues would be reduced,
putting pressure on the affordability of several social
programs. For energy-driven countries, a stark
reduction in revenues from mineral resources may

60 | The Global Competitiveness Report 2013–2014

pose particular challenges to their welfare systems.
An additional link between energy, environment,
and social sustainability is the use of alternative
energy sources, such as ethanol and biodiesel.
Although these energy sources help to reduce
CO2 emissions, they also use wide land areas,
contributing to the increase in food prices that led
to a food crisis in 2008. Moreover, these alternatives
also have significant environmental impact in the
form of additional pressure on water resources, for
example.30
• Climate change, food security and conflict.31
In the future, rising sea levels and more extreme
weather conditions may force millions of people
to migrate, adding pressure on the use of natural
resources—especially water—in the destination
areas. Rising competition over these resources
could eventually result in military conflict. Adverse
changes in temperature and precipitation are
likely to influence the capacity of many areas to
produce food, thus increasing the vulnerability of the
population. According to some studies, at present
1.7 billion people live in water-stressed countries.
Industrialization and demographic forces are likely
to further aggravate the situation, and climate
change may exacerbate the situation even more by
decreasing stream-flow and groundwater recharge.
Pressure on water resources and land,
combined with a growing world population and
rising poverty in some regions, may also aggravate
food security concerns, which already represent a
major problem today.32 At present, in the developing
world there are at least 800 million individuals
without sufficient access to food. In less-developed
countries, decreasing crop yields may lead to
further exploiting degraded land, while globally,
changing environmental conditions are reducing
crop productivity. This constellation of pressures
may increase food insecurity in the long term, even
in areas where food availability is relatively secure
today.
• Climate change and women’s empowerment.33
According to a growing body of research, climate
change is not gender neutral. In many rural and
traditional societies in Africa, women are responsible
for securing water, food, and energy for cooking
and heating. But the effects of climate change such
as droughts, heat waves, infections encouraged by
rising temperatures, deforestation, and uncertain
rainfall make it harder for these women to secure the
resources they need. This, in turn, further weakens
their position in society and reduces opportunities to
better their lives and that of their families.

DEFINITION OF SUSTAINABLE COMPETITIVENESS
Given all these forces and interrelationships, and as
already mentioned at the beginning of the chapter,
we define sustainable competitiveness as the set
of institutions, policies, and factors that make a
nation remain productive over the longer term while
ensuring social and environmental sustainability.
Fundamental to this concept is the notion that, although
competitiveness can be equated with productivity and
economic performance, sustainable competitiveness
can be linked to a broader concept that focuses on
aspects that go beyond mere economic well-being to
include other important elements that render societies
sustainably prosperous by ensuring high-quality growth.
Another way of looking at the concept of sustainable
competitiveness is that it aims to gauge not only whether
a country has the potential to grow over the medium
and long term, but whether the national development
process is producing the kind of society in which we
want to live.
THE MEASUREMENT OF SUSTAINABLE
COMPETITIVENESS
In order to assess where we stand today and to provide
meaningful insights about how we want to proceed
on these inter-related issues, we need to be able to
measure sustainability. The following sections lay out the
key existing approaches to measuring sustainability and
describe the methodology of the sustainability-adjusted
Global Competitiveness Index, which is the World
Economic Forum’s ongoing contribution to these efforts.
Efforts to measure sustainability
Over recent decades, significant efforts have been
made to devise methods and metrics for capturing the
concept of sustainability. For example, the concept of
triple bottom line accounting, which emerged in the
1980s, was a major attempt at expanding the traditional
reporting framework for companies and countries to
take into account environmental and social performance
as well as financial and economic performance.
The work of the Stiglitz-Sen-Fitoussi Commission in
2009 also reflects a remarkable attempt to expand
the measurement of prosperity in societies “beyond
measures of market activity to measure wellbeing.”
International organizations have also embraced these
efforts. The European Commission, for example, has
integrated sustainability objectives into its growth
strategy: “The Europe 2020 Strategy, for smart, inclusive
and sustainable growth.”34 The OECD is undertaking the
Better Life Initiative, measured by the Better Life Index,35
which includes social and environmental sustainability
metrics; and, finally, the United Nations Development
Programme (UNDP) has also included the concepts
of environmental sustainability and equity in its human
development assessment.36

All these efforts to better integrate environmental
and social sustainability metrics into mainstream
development thinking have been possible thanks
to the ongoing attempts to improve the indicators
in these fields, which are still not widely available.
In terms of metrics on environmental sustainability,
the Environmental Performance Index (EPI) and its
predecessor the Environmental Sustainability Index,
developed by researchers at Yale and Columbia
universities;37 the Ecological Footprint,38 developed by
the Global Footprint Network; and the Global Adaptation
Index,39 created by the Global Adaptation Institute, have
been pioneers in measuring the ecological resource use
and resource capacity of countries.
For social sustainability, fewer attempts have
been made. Among others are the World Bank’s
Worldwide Governance Indicators Framework, which
measures different aspects of governance such as
political instability, voice, and accountability;40 and
the International Labour Organization’s Decent Work
initiative, which aims at measuring various elements
relevant for labor conditions.41
Despite this progress, a generalized lack of
high-quality data that would allow countries to fully
understand how they fare in these critical areas
persists. Without an improvement in the quality and
availability of key data on social and environmental
sustainability, countries will continue to have trouble
assessing the situation and monitoring their evolution
in key dimensions. It will therefore be difficult for them
to determine and implement appropriate policies and
measures to ensure that their development model leads
to the desired outcomes.
Sustainable competitiveness: The analytical
framework
Based on our definition of sustainable competitiveness,
we have developed a framework that aims to create
a common ground to develop policies that balance
economic prosperity with social inclusion and
environmental stewardship. This conceptual model is
represented in Figure 1, which presents a framework
where the Forum’s index for measuring competitiveness,
the Global Competitiveness Index (GCI), is adjusted
by factors that encompass social and environmental
sustainability.
This framework highlights the central position
of competitiveness as the key driver of prosperity in
society. High levels of competitiveness are crucial to
sustained prosperity. The GCI measures the level of
competitiveness of an economy, as discussed in Chapter
1.1, defined as the set of institutions, policies, and factors
that determine the level of productivity of an economy.
The GCI is a comprehensive index that takes into
account 12 pillars or drivers: institutions, infrastructure,
macroeconomic environment, health and primary

Note: Refer to appendix A for a detail explanation of the methodology.

education, higher education and training, goods market
efficiency, labor market efficiency, financial market
development, technological readiness, market size,
business sophistication, and innovation. The variables
that are analyzed in each of these 12 pillars are well
known and benefit from more than 30 years of ongoing
work on competitiveness at the World Economic Forum
as well as a rich literature on growth and development.
However, the framework presented in Figure 1
indicates that competitiveness on its own may not lead
to sustainable levels of prosperity. While the attainment
of a certain level of economic prosperity is essential
for achieving high standards of living, within this
exercise, countries are assessed also for their ability to
generate this long-lasting prosperity for their citizens in
a sustainable way. In other words, competitiveness is
a necessary but not sufficient condition for continued
prosperity—hence the need for social sustainability–
adjusted and environmental sustainability–adjusted
measures of competitiveness.
As described in the first half of this chapter, defining
the functional relationship between competitiveness
and sustainability and identifying and measuring the
pillars and variables that are driving environmental and
social sustainability are complex tasks from both a
conceptual and a measurement point of view. Sufficient

62 | The Global Competitiveness Report 2013–2014

evidence does not yet exist that would lead to a solid
functional relationship among them; we therefore opt
for the simple approach of defining a linear relationship
among the three dimensions. As a result, the final overall
sustainability-adjusted Global Competitiveness Index is
an average of the two sustainability-adjusted indexes: the
social sustainability–adjusted GCI and the environmental
sustainability–adjusted GCI.42
Social sustainability pillar
For social sustainability, the Forum identifies three
conceptual elements (Figure 2). The first category aims
to assess a population’s access to basic necessities.43
It includes three indicators: Access to sanitation, Access
to improved drinking water, and Access to healthcare
services. This category is thus a measure of inclusion
as well as a measure of the fulfillment of basic physical
needs. Other indicators that we would have liked to
incorporate but could not because of the lack of data
include access to decent housing and food security.
A population with poor access to water, food, shelter,
healthcare, and sanitation cannot develop to its full
capacity.
The second category is linked to the concept of
perceived economic security. Hence it aims to evaluate
a population’s vulnerability to economic exclusion.

Three indicators have been chosen for this evaluation:
Vulnerable employment as a percentage of total
employment, The extent of informal economy, and
Social safety net protection. The vulnerable employment
indicator measures the percentage of people who are
self-employed in a small business or are in a small family
business that may provide income levels insufficient to
meet the living standards of the country of residence and
can prove unstable in times of economic difficulties. The
extent of the informal economy provides a sense of how
well integrated the workforce is into official structures.
A workforce that is less integrated leaves workers more
vulnerable to concerns related to job loss, old age,
maternity, disability, or illness. Third, the social safety net
is a complementary measure of protection: in times of
financial and economic instability, it helps households to
maintain their access to basic needs and weather crises
without falling into poverty traps. Providing protection
also leads to a sense of financial security that enables
individuals to undertake investments and entrepreneurial
risk, which can in turn translate into the creation of new
jobs and innovative ideas, thus benefitting the economy.
A third category can be thought of as an
assessment of social cohesion including the following
indicators: the Income Gini index, Social mobility, and
Youth unemployment. We include the income Gini index
as a measure of income inequality, but keeping in mind
that—from a normative approach—excessive inequality
may hide relative poverty that would prevent lowerincome families from accessing the same opportunities
as those with incomes at the high end of the range in the
society. Linked to this idea, we include an indicator on
social mobility, which was introduced last year into the
World Economic Forum’s Executive Opinion Survey.44 In

the context of sustainable competitiveness, it is crucial
that subsequent generations can improve their condition
regardless of the socioeconomic status of their parents.
From a purely economic perspective, the absence of
such social mobility can be detrimental to human capital
development because talented individuals, in a society
that does not allow them to access education and move
ahead, will not be leveraged for economic advancement
and they may leave the country to pursue opportunities
abroad. Additionally, low expectations for the future in a
context of high unemployment and persistent inequality
can spark political instability. On a broader conceptual
level, social mobility is also a direct measure of the
freedom to pursue human development. Finally, high
youth unemployment can reduce social cohesion and
incur significant economic and social costs. It depresses
lifetime earnings for unemployed workers, taking a toll
on their health and reducing the potential of the next
generation to succeed. From an economic standpoint,
high youth unemployment reflects a failure to mobilize
existing resources and build productive skills.
Environmental sustainability pillar
To develop the environmental sustainability pillar, the
Forum has worked closely with experts at Yale’s Center
for Environmental Law and Policy (YCELP) and with the
Center for International Earth Science Information Network
(CIESIN) at Columbia University’s Earth Institute to define
the best existing indicators to use in this area and to
understand the shortcomings of these data. The measures
captured here and presented in the environmental
sustainability pillar are meant to complement the analysis
carried out through the Environmental Performance Index
(EPI) produced by these two organizations, which provides

a much more comprehensive indication of national
performance on a variety of environmental indicators.
In this pillar, indicators have been selected
according to three categories (see Figure 3) aimed at
covering the most relevant aspects of environmental
sustainability.
The first area measured in the environmental
sustainability pillar is environmental policy, which is
composed of a gauge of the stringency and enforcement
of environmental regulations along with the extent
to which land areas are protected, providing an
assessment of a country’s commitment to protecting
natural capital. We also include a measure of the number
of key international environmental treaties, out of a total
of 25, in which the country is a participant. This variable
demonstrates the country’s level of engagement with
environmental issues and thus its willingness to become
involved in international efforts toward addressing global
environmental challenges. Together these variables
capture to some extent the political will of countries to
respond to environmental issues in a structured and
consistent way and indicate their importance in the
government agenda.
The second area relates to the use of renewable
resources. These indicators comprise measures of
water withdrawal intensity of agriculture in an economy,
which considers the extent to which the agriculture
sector is efficient in its use of water; forest cover change,
which takes into account reported information about
the percentage of total land area that is deforested (or
afforested) over time; and the exploitation of fishing
grounds. A diminishing regeneration capacity is one
of the major environmental issues for which a simple
solution is not easily identified. Although the data in this
area are among the most difficult to collect and interpret,
it is crucial for a country to manage these resources
in order to ensure that they remain available for future
generations.
The third area takes into consideration the
degradation of the environment, which can cause
serious damage to human health while destroying the
ecosystem. The specific indicators used to measure this
concept are the level of particulate matter concentration,
the quality of the natural environment, and CO2
intensity. Particulate matter concentration is a proxy
for air pollution, which has proven negative effects on
human health and is monitored by local authorities in
many countries. The quality of the natural environment
is a perception-based assessment of the local status
of the environment that measures the observation of
local business leaders on the ground. CO2 intensity is
a measure of the efficiency of energy use in relation to
the emissions it produces. It is important to note that,
although CO2 intensity also provides a sense of national
contributions to climate change, at present, the decision
was taken not to include climate change as a specific

64 | The Global Competitiveness Report 2013–2014

factor in this pillar. This is because there is currently no
agreement on how to attribute emission responsibilities
to particular countries. For example, in a world of
globalized markets, should emissions be allocated to the
country producing the goods that created the emissions,
or to the consuming country? Also it is not yet clear
what impact countries’ contributions to climate change
would have on national competitiveness, particularly in
the absence of an international agreement that would
impose costs on large emitters.
While the variables described in this and the
previous sections capture a number of important
aspects of social and environmental sustainability,
additional variables would be needed to obtain a more
complete measure of the concept. These indicators
include measurements of social participation and respect
for core human rights, as well as discrimination and
the treatment of minority populations and additional
environmental indicators. However, as noted in Box 3,
because of the lack of quality indicators in these areas
we are unable to include them for the time being.
Calculation of the sustainability-adjusted GCI
The two areas of sustainability—social and
environmental—are treated as independent adjustments
to each country’s performance in the GCI. The details
behind the aggregation are described in Appendix A;
Appendix B provides detailed notes and sources for
each indicator. The aggregation leads to three outcomes:
an environmental sustainability–adjusted GCI, a social
sustainability–adjusted GCI, and an overall sustainabilityadjusted GCI that combines the two effects.
Lacking clear theoretical guidelines in assigning
weights to the individual elements, each indicator
has been given an equal weight within each pillar.
As described in detail in Appendix A, each pillar is
converted into an “adjustment coefficient” with a range
from 0.8 to 1.2, which is then used to adjust the GCI
score upward or downward within this range. This result
is an adjusted score of a maximum of 20 percent lower
or 20 percent higher than the underlying GCI score.
The single indicators are aggregated using a
simple average. Although this aggregation method
is transparent and simple to replicate, its limitation is
that it allows for compensation across the different
sustainability dimensions. This needs to be kept in mind
when interpreting the results, especially on environmental
sustainability. For example, Brazil performs well on a
number of environmental indicators but ranks poor
in terms of deforestation. By construction, the poor
performance on the forest cover change indicator
is compensated for by the good results in other
areas; consequently Brazil attains an above-average
performance for environmental sustainability despite
deforestation.

Box 3: Data limitations and a plea for better sustainability data
High-quality data on the social and the environmental
dimensions of sustainability are critical for international
benchmarking, tracking progress, and analyzing relationships
between the different dimensions. Yet, despite the great effort
of many organizations to assess some aspects of sustainability,
data availability is not satisfactory and the lack of a complete,
high-quality global dataset represents a relevant and severe
limitation to the ability to compare data across countries and
benchmark progress over time.
Even when data are available, they are in many cases
not collected on a regular basis, measure concepts that are
either too broad or too narrow, or are not calculated with
a consistent methodology across countries. For example,
youth unemployment is not measured according to the same
methodology across countries and the related datasets are
not updated regularly. As a result, figures are in some cases
more than five years old and hence are incapable of reflecting
the rapidly changing reality on the ground, for example
following the most recent financial crisis. Using out-of-date
figures can be misleading for policymakers, who require
statistics that accurately reflect the current situation in order
to gain a sense of the effectiveness of their reform efforts.
At the same time, for a number of key concepts
of sustainability, indicators are simply not available. The
absence of such indicators is reflected in our assessment
of sustainable competitiveness: a number of measures that
we recognize as relevant and would like to include in our
methodology are missing, and hence the results reflect an
“omitted variables” bias.
Some of the most relevant missing indicators include:
• Inclusion of minorities. A measure of how homogenous
and how well integrated the social fabric is would provide
a relevant component of social sustainability. Although
there is no evidence that the exclusion of minorities can
cause instability, it is widely recognized that this can be a
source of tensions and political polarization.
• Civil and political rights. Political and civil rights, such
as freedom of speech and freedom of association,
facilitate higher levels of transparency and support a
system of checks and balances. They generally result in
more inclusive governance systems that ensure that the
benefits of progress are distributed more widely within the
society. Although some indicators in this domain exist,
the intangible nature of the topic does not easily allow for
a quantitative assessment of the level of political rights
present in a country.
• Real purchasing power of households. In the context
of social sustainability, it is desirable to ensure that
salaries allow for a sufficient and secure income and full
participation in the country’s prosperity and opportunities.
Although several studies at the local level highlight
the erosion of the purchasing power of households in
several advanced economies, this phenomenon does not
emerge in our analysis because it cannot be captured
by the indicators used in our methodology. Despite the
efforts of the International Labour Organization, which
has published statistics on labor rights and productive
work, the data available cover only a limited number of
economies. Until such data are available for a wide range
of countries, they cannot be considered for a global
assessment.

• Welfare schemes. Although preferences for the generosity
of welfare schemes may differ across countries, these
schemes should be affordable in the long run without
placing a major burden on public finance. A measure of
the financial sustainability of social protection for a large
number of countries would allow us to better assess the
balance of social protection and public finance.
• Water stress. As water is one of the most critical
resources for human life as well as for economic activity,
sound water indicators are of primary importance.
Currently such indicators are not available for a large
number of countries because their measurement is very
complex. One challenge comes from the fact that water
is unevenly distributed on the planet, it flows through
national borders, and it can be used for more than one
purpose. Another difficulty originates from the fact that
water is used differently according to its availability.
For example, agricultural products change in different
climates: water-intensive products such as paddy rice
are most likely produced in areas with abundant water.
Consequently, a relevant indicator should measure the
actual level of net water available compared with the
needs of the population and businesses. The Forum is
in contact with the World Research Institute (Aqueduct)
program to develop a water stress indicator to be
included in the sustainable competitiveness framework in
future iterations.
• Water pollution. The availability of clean water determines
the health of the population and indirectly affects
migration patterns. Managing water efficiently requires
minimizing water use as well as keeping the water tables
fully usable. Internationally comparable data on water
quality could contribute to further highlighting the issue.
• Recycling. Being able to re-use material is critical to
the ability to continue producing new goods without
depleting the mineral and natural resources available. An
assessment of how much of the material incorporated
in consumer goods is actually re-used would constitute
a good benchmark for countries’ exposure to resource
scarcity.
• Waste management. Directly linked to recycling,
managing waste is essential for establishing a culture of
recycling as well as for avoiding the careless disposal
of dangerous materials that affect the health of the
population. Unfortunately, cross-country data that can
measure the management of waste are not yet available.
In order to bridge the gap in measuring sustainability,
a wider international effort is required. This challenge can
be met by pooling resources to produce and collect the
data and by defining global measurement standards. To
contribute to data production and collection, in 2012 the
World Economic Forum created the Global Agenda Council
on Measuring Sustainability. One of the main objectives of the
Council is to create a platform to enable and incentivize data
collection from different sources and make them available for
researchers and the public at large. Additionally, the Council
aims to bring scientists and policymakers together to develop
new sustainability indicators.

Figure 4: Country performance on the GCI and the components of the sustainability-adjusted GCI

7
GCI score
6

Social sustainability–adjusted GCI

Score (1–7 scale)

Environmental sustainability–adjusted GCI
5

4

3

2

1

Low

High

Countries by GCI rank

Nothwithstanding extensive research efforts, we
were not able to identify new metrics of appropriate
quality to be included in the index. At the same time,
based on a detailed review of the structure of the two
pillars, the indicator Forest loss has been dropped
because of its overlap with the indicator Forest cover
change.
In this year’s Sustainable Competitiveness exercise,
we are able to increase the country coverage to 121
economies, up from 79 in the previous edition of the
Report. This significant increase in coverage is mainly the
result of dropping the indicator Forest loss, which was
not available for a number of countries. Yet coverage
remains lower than for the GCI, which includes 148
economies this year.
Results of the sustainability-adjusted GCI analysis
In this section, the results from the sustainability-adjusted
GCI analysis are presented. Table 1 shows how the GCI
score is adjusted once sustainability indicators are taken
into account. An upward arrow shows that sustainability
results drive a better score than the GCI itself; a
downward arrow points to a situation of vulnerability in
terms of social and/or environmental sustainability that
lowers the GCI score. A “flat” arrow indicates that GCI
results do not change substantially once sustainability
aspects are taken into account.
As Figure 4 shows, the results indicate that there
is no clear trade-off between being competitive and
being sustainable. Countries attain results on the two
elements of sustainability that are above or below the

66 | The Global Competitiveness Report 2013–2014

competitiveness score at all levels of competitiveness.
However, countries in the top half of the competitiveness
rankings tend to perform better on sustainability as
well. This is particularly true for the social sustainability
dimension, which is, not surprisingly, highly correlated
with the level of development. Developed economies
tend to have more mature institutions that ensure that
citizens have access to basic infrastructure, health, and
welfare. At the same time, countries that face challenges
related to their competitiveness fare even more poorly in
terms of social sustainability.
In terms of environmental sustainability, the picture
is more complex. Countries toward the lower end of the
competitiveness scale tend to fare better than advanced
economies in terms of emissions such as CO2, as well
as manufacturing-related pollution such as waste and
by-products of industrial processes.45 However, these
economies are currently facing problems that advanced
economies have already experienced in their own earlier
stages of development, such as biodiversity loss caused
by deforestation, urbanization, and the expansion of
agricultural land as well as air pollution (measured here
through particulate matter, or PM2.5, emissions) triggered
by the use of older combustion technologies, especially
in the transport sector. Therefore, not surprisingly, cities
in countries such as Bangladesh, Brazil, China, India,
and Nigeria are among some of the most polluted areas
on the planet.

RESULTS FOR SELECTED ECONOMIES
Switzerland remains at top of the sustainability-adjusted
GCI and shows a high level of sustainability on both the
social and environmental dimensions of the index. Low
unemployment combined with relatively good social
protection enables Switzerland to perform well on the
social dimension. In terms of environmental sustainability,
although results are positive in comparison with other
countries, the treatment of chemicals and air pollutant
emissions appear to be areas for improvement. The
performance of Switzerland demonstrates that there is
no necessary trade-off between being environmentally
and socially sustainable on the one hand and being
competitive on the other. In general terms, countries
that are close to the innovation frontier can innovate
and manage their resources effectively, and in fact
these countries are often keener to monitor possible
sustainability concerns and to put in place policies to
address them. Although Switzerland does not yet attain
the maximum possible score, indicating there are still
areas for improvement, the country’s leadership and
population are certainly aware of the pressures on
environmental resources and social issues and do much
to address them.
Similarly, Nordic countries perform well in terms
of sustainability. Norway is the only other country
(besides Switzerland) that attains very strong results in
both aspects of sustainability, being the only country
in the Nordics with youth unemployment below 10
percent and wide-ranging social protection combined
with low emissions and good land management on
the environmental side. One area for improvement
is Norway’s depleting fish stock. Finland attains a
similar performance, scoring well especially on the
social dimension with a high level of social protection
and universal access to healthcare; however, these
good results are partially offset by a relatively high
youth unemployment figure (20.3 percent). In terms of
environmental sustainability, Finland is also relatively
sustainable with strict regulations, low water stress,
and low emissions. However, little protected land area
and some pressure on fish stocks prevent the country
from attaining an even better result. Sweden also
performs well both in terms of social and environmental
sustainability, but at a lower level than other Nordic
countries, especially on the social pillar where the
country’s persistently high youth unemployment rate
continues to weigh heavily. In terms of environmental
sustainability, Sweden attains a result similar to Finland,
with generally responsible management of resources;
limitations are seen, however, in some concerns over
depleting fish stocks and very little protected land area.
Germany performs relatively well on both aspects of
sustainability. On the social sustainability pillar, relatively
low youth unemployment, wide access to healthcare,
and the presence of a social safety net are the main

drivers of the positive assessment. Some emerging
social difficulties, such as the increasing number of
employed people who rely on the welfare state, may put
the country’s social sustainability at risk.46 Environmental
sustainability is also relatively positive. Stringent and
well-enforced regulations and the existence of a large
amount of protected land indicate Germany’s particular
attention to environmental issues. However, despite
the country’s efforts, some areas for improvement
remain. CO2 intensity is still relatively high, although
slowly diminishing, and fish stocks appear somewhat
overexploited.
The performance of the United States in terms
of sustainable competitiveness is, as in the previous
edition, modest, with somewhat better results for social
than environmental sustainability. The country’s social
sustainability score is somewhat lower than that of
other advanced economies because of high income
inequality and relatively high youth unemployment (17.3
percent). According to the 2012 assessment from the US
Census Bureau, more than 16 percent of the population
lived in poverty in the United States—a worse result
than the 14.3 percent of 2009 and a sign of increasing
polarization within the income structure. In terms of
environmental sustainability, the below-par performance
of the United States is the consequence of several
factors that include the country’s lack of commitment
to joining international treaties, its limited political will
to firmly improve on critical environmental issues, the
high pressure on its water resources for agriculture,
its relatively high CO2 emissions, and limited protected
land area. This aligns with the concerns highlighted
by the US Environmental Protection Agency (EPA) on
the need to protect habitats, especially on the coasts
where urbanization is moving faster. The EPA recognizes
that the loss of open land and forest because of its
conversion to urban areas or agricultural uses is a
significant threat to natural habitats.47 On a more positive
note, air quality is improving somewhat in several areas
in the country.
Japan receives a relatively positive assessment
in the social sustainability component, performing
better than other economies thanks to low youth
unemployment, a small informal economy, and a sound
social safety net. However, the country also displays
a relatively high level of income inequality. On the
environmental side, Japan’s performance is more mixed.
The country is doing well in terms of environmental
policies (with high commitment to ensuring that
regulations and standards are in place), yet it continues
to face a high level of CO2 emissions and it faces some
pressure on water resources and on fish stocks.
Among other countries performing well in terms
of environmental sustainability, New Zealand emerges
as an economy with a strongly articulated political
commitment to environmental stewardship. It performs

* This is the GCI rank, as presented in Chapter 1.1. Only the 121 countries covered by this exercise are included in the table.
† This is the score obtained by multiplying the GCI score by the social sustainability coefficient.
‡ This is the score obtained by multiplying the GCI score by the environmental sustainability coefficient.
‡‡ This is the average of social sustainability–adjusted GCI and environmental sustainability–adjusted GCI scores.
Please refer to the technical appendix of this chapter for a description of how the coefficients are calculated. All the underlying indicators are available at http://www.weforum.org/content/pages/
sustainable-competitiveness.
Key

better than neighboring Australia. The main differences
between the two countries lie in the lower level of air
pollution in New Zealand and the country’s efforts to
set aside protected land areas. Both countries receive
strong assessments for their social sustainability as well.
The United Arab Emirates emerges as somewhat
socially sustainable, although its environmental
performance shows some weaknesses. Low youth
unemployment and wide access to basic necessities
(sanitation and drinking water) drive these fairly positive
results. In terms of environmental sustainability, however,
high pressure on water resources (partially the result
of geographic conditions) and a high concentration
of particulate matter lead to an overall below-par
performance. In addition, the country is signatory to
fewer international environmental treaties than most
countries, and CO2 emissions, although decreasing, are
also relatively high.
China’s competitiveness is overall less positive once
the sustainability measures are taken into account. The
environmental sustainability component particularly is
less positive. In terms of social sustainability, China’s
performance is comparable to its overall competitiveness
score, although this may be affected by the fact that
the country does not report data related to youth
unemployment or vulnerable employment. Access to
improved drinking water and sanitation are improving
slightly, as is the perceived access to healthcare, and
there is some access to a social safety net. However, the
fraction of the population covered by the welfare system
is still relatively small and is restricted mainly to full-time
urban workers, and 35 percent of the population still
does not have access to improved sanitation facilities.
Additionally, income inequality is high, with stark
differences across different geographical areas but also
within cities; this situation has driven the government
to consider raising the national minimum wage to 40
percent of average urban salaries by 2015.
It is, however, the environmental sustainability
dimension in which China’s competitiveness may
encounter the most important challenges. The level
of emissions (both CO2 and PM2.5 particles) continues
to rise, and air pollution is worsening in several cities.
The agricultural sector places a great deal of pressure
on the environment (e.g., China’s water intensity is
very high). Water pollution is also pervasive, with the
ecosystem of water streams severely damaged. Rapid
industrialization has taken a heavy toll on the Chinese
natural environment, especially in terms of pollution,
and—according to a study from the Beijing-based
Chinese Academy for Environmental Planning—this has
also resulted in productivity loss. Health issues, crop
degradation, and losses from pollution-related accidents
have reduced China’s productivity, with the total cost
arising from pollution estimated at 3.1 percent of GDP.48
The tangible deterioration of natural capital has induced

70 | The Global Competitiveness Report 2013–2014

the government to plan changes to the way resource
use is taxed: according to the Chinese press,49 the
government envisages changing the taxation of coal in a
way that would increase coal prices and discourage the
use of this fuel. Additionally China may introduce a tax
on water use. The Chinese leadership’s growing focus
on the natural environment will be important for placing
the country on a more sustainable path over the next few
years.
Indonesia’s assessment on sustainable
competitiveness brings down the country’s GCI result.
In terms of social sustainability, the primary area of
concern is the significant share of the population
in vulnerable employment. Additionally, access to
sanitation remains low (40 percent of the population
does not have regular access to sanitation facilities) and
access to healthcare services is inadequate. From an
environmental perspective, sustainability is threatened
by the high rate of deforestation, which is depleting
the country’s forests and destroying the habitat of a
highly biodiverse ecosystem. Logging and agriculture
are taking the highest toll on Indonesia’s forests,
which could be protected by stricter enforcement of
environmental regulations. In addition to deforestation,
Indonesia’s environmental issues include a rising level
of CO2 emissions and the relatively high intensity of
water use for agriculture. Beyond the assessment of
this framework, marine pollution is also reported to be
severely damaging Indonesia’s coral reefs.50
Turkey attains a middling score on the social
sustainability dimension and a lower score in the
environmental sustainability–adjusted GCI than it
does in the GCI itself. In terms of social sustainability,
the country’s relatively high youth unemployment,
its large informal sector, and its limited social
protection continue to represent its main challenges.
In terms of environmental sustainability, high CO2
emissions, intensive water use for agriculture, and
limited protected land area together with a lack of
commitment to international environmental agreements
contribute to diminishing the sustainability of long-term
competitiveness.
South Africa’s social sustainability is undermined
by high income inequality and youth unemployment.
In addition, the country has not yet achieved universal
access to sanitation. On a more positive note, the share
of the population in vulnerable employment is relatively
low and social mobility is somewhat better than it is in
many other countries at a similar stage of development.
From an environmental point of view, South Africa’s
performance is weakened mainly by increasing CO2
emissions and strained water and fish stock resources.
Soil erosion and practices connected with commercial
farming, such as the use of pesticides, add to the
pressures on the environment.

Brazil’s results on sustainable competitiveness are
in line with its GCI score, and it has a somewhat more
positive assessment on environmental sustainability.
The size of the country and the richness of its natural
assets result in relatively positive aggregate results in
areas such as emissions and air quality. In addition,
environmental regulation has become stricter following
recent efforts to undo the damage inflicted on the
natural environment that occurred in the process of
industrialization. However, some issues—such as the
country’s long-running deforestation—do not seem to be
improving. The Brazilian government disclosed figures
earlier this year pointing toward further deforestation
in the Amazon, undoing recent progress in preserving
the rainforest.51 In terms of social sustainability, the
population’s high income inequality and poor access
to health and sanitation is damaging the country’s
capacity to sustain its competitiveness. Protests
recently took place in several of Brazil’s cities, and
although the causes are complex, some of the country’s
socioeconomic intricacies play a key role. Inefficient and
expensive public transport, rising prices compared to the
level of salaries, and poor access to credit, combined
with strong income disparities, are undermining social
sustainability in the country.
India’s sustainable competitiveness is also
characterized by concerns in both areas of sustainability.
On the social sustainability side, India’s performance is
hindered by lack of access to basic sanitation and health
services for many of its citizens (only 35 percent of the
population has access to improved sanitation). Also,
despite the introduction of the National Social Assistance
Programmes (NSAP) in 1995, the share of population
covered by the social safety net is still relatively small.
This issue, combined with a large informal sector and a
high share of the workforce in vulnerable employment,
makes it difficult to manage the country’s growing
income inequality. Altogether these structural issues
make India’s competitiveness vulnerable to shocks.
India’s environmental performance also hinders the
achievement of sustainable competitiveness. A high level
of emissions (especially in terms of particulate matter
concentration) and few protected areas are wearing
down the quality of the natural environment. Additionally,
high agricultural water-use intensity is depleting water
tables because usage is above their regenerative
capacity. According to the Ministry of Water Resources,
“68% of the country is prone to drought in varying
degrees of which 33% is chronically drought prone.”52
Agriculture use, industrial use, increasing population,
infrastructure gaps, and contamination exacerbate the
water scarcity issue. The Ministry of Water Resources
reports that: “high incidence of fluoride, arsenic, iron
& heavy metals has been found in isolated pockets” in
several states.53

Peru’s competitiveness is also reduced once
sustainability measures are taken into account in both
the social and environmental areas. Regarding social
sustainability, Peru is characterized by high income
inequality, which is worsened by a large informal
economy that leaves many people unprotected. Although
the country’s strong growth contributes to slowly
reducing unemployment, and although measures to
improve primary education, nutrition, and childcare have
been taken by the government, a weak social safety net
exposes workers to shocks and access to healthcare
is far from being universal. On the environmental
sustainability front, although a high share of Peru’s
surface is forested—partially thanks to the creation
of several protected land areas—the enforcement of
environmental regulations is quite lax, to the detriment of
efforts to preserve the environment. For example, illegal
logging is a menace as authorities struggle to fight the
phenomenon effectively. In addition, the level of CO2
emissions is on the rise, spurred by an increased level of
industrial activity, while the fishery sector, one of the key
export areas for the country, is registering a depletion of
fish stock. Another environmental issue is the pollution of
water resources, especially in areas with strong mining
development, which has recently spurred several local
protests in the country.
The Russian Federation attains an intermediate
performance with a sustainability score in line with its
GCI results across both pillars, although some important
challenges may undermine the country’s sustainability
going forward. In terms of social sustainability, the
Russian Federation is characterized by a relatively
weak social safety net, high and increasing inequality,
and limited social mobility. In terms of environmental
sustainability, its lax environmental regulations, resource
depletion, and the slowly degrading quality of its natural
environment emerge as the most important challenges
for the country’s leadership. The Russian Federation
is endowed with rich natural resources—including
some of the largest water reserves in the world and
widespread forests. The consequence is that the country
still performs relatively well on several environmental
indicators in international comparison, despite the
depletion of those resources.
Colombia’s competitiveness is pulled down once
sustainability is taken into account. In terms of social
sustainability, income inequality is high, over 20 percent
of households still do not have access to improved
sanitation, and access to healthcare services is fraught
with difficulties. Additionally, despite efforts by the
government, the social safety net is still not very strong
in a country where over 30 percent of the population
lives in poverty, although it should be noted that poverty
is declining. The difficult economic situation of many
households hinders social mobility, which reinforces
persistent income inequality. This inequality is further

exacerbated by—according to the OECD—the country’s
high unemployment and the fact that the majority of
those working are employed in informal, and often lowproductivity, jobs, which in turn cements labor market
segmentation. In terms of environmental sustainability,
Colombia’s performance is comparable with its
competitiveness results. Colombia is one of the most
biologically diverse countries on the planet, has little
pressure on its water tables, and has several protected
land areas. However, a number of factors threaten
the country’s unique biodiversity. First, the somewhat
weak enforcement of environmental regulations
limits the effect of establishing protected areas and
fails to abate pollution. Additionally, deforestation is
occurring because of the country’s growing population,
infrastructure development, illegal logging in coastal
tropical rainforests, small-scale agricultural activities,
mining, and the cocaine trade. According to international
studies,54 each year Colombia loses nearly 200,000
hectares of natural forest. According to the World Bank,
a 2006 study found that the costs of environmental
degradation—including air pollution and inadequate
water, sanitation, and hygiene—amounted to 3.7 percent
of Colombia’s GDP,55 limiting Colombia’s long-term
sustainable competitiveness.
Vietnam’s GCI performance is weakened once
sustainability measures are considered. In terms of
social sustainability, the main issues are the country’s
lack of access to healthcare services, its insufficient
social mobility, and the large segments of its population
in vulnerable employment. Although Vietnam’s social
sustainability is not very strong, the challenges are even
more significant in the environmental domain. First,
regulations are assessed as lax and not well enforced,
an attitude that is also reflected in the country’s
low level of commitment to international treaties. In
addition, Vietnam has a high level of particulate matter
concentration and CO2 emissions. Moreover, the
pressure on water resources and fish stocks is relatively
high. Overall, the rapid industrialization of the country
is having a strong negative impact on the environment,
including air and water pollution (not fully measured by
this framework), which together may put the country’s
long-term competitiveness and the living conditions of
the citizens in jeopardy if more sustainable processes are
not adopted.
Zambia’s competitiveness is weakened especially
by social sustainability issues, while on the environmental
front, despite some ongoing concerns, its performance
is in line with its competitiveness. Access to sanitation,
improved drinking water, and healthcare services are still
very limited, which—together with the large portion of the
population working in vulnerable employment—explains
the negative performance on the social dimension.
In addition, income is unevenly distributed, and the
country has one of the highest income Gini coefficients

72 | The Global Competitiveness Report 2013–2014

in the world. In terms of environmental sustainability,
Zambia protects a large portion of its land, has relatively
stringent regulations, and manages to keep the level
of CO2 emissions low, which together contribute to its
above-average performance on this dimension. However,
issues such as the net loss of forests and water pollution
connected especially with the lead processing and
mining industry still need to be addressed. Because
of high levels of lead in some areas, Zambian children
average a lead concentration in their blood that is
between five and ten times greater than what is
considered safe by the US Environmental Protection
Agency. The World Bank has allocated approximately
US$40 million toward a clean-up project in these areas.56
Kenya’s sustainable competitiveness is similarly
weakened especially by the social dimension, while
environmental sustainability is not presently affecting its
score. The data point to a need for developing certain
areas of social sustainability. Access to improved
drinking water, healthcare services, and sanitation
facilities are limited (the latter are available for less than
30 percent of the population). A significant share of
the population still relies on vulnerable employment,
and widespread poverty is exacerbated by a lack of
social mobility. In terms of environmental sustainability,
Kenya has put into place a relatively well enforced
regulatory framework, is committed to international
treaties, and has created several protected land areas.
In addition, in line with its position in the industrialization
process, the country’s level of emissions (both CO2
and particulate matter) is low, limiting such damage
to the natural environment. Yet protection of forests
and habitats remains an issue, with logging related to
timber production and agriculture reducing the stock of
forests faster than their natural regenerative capacity.
Water scarcity also needs to be addressed, as intense
agriculture use and pollution are limiting the availability of
water to the population.
In Senegal, the main areas of vulnerability are found
in social sustainability. Although somewhat better than
other sub-Saharan African countries, access to improved
sanitation is limited (only 51 percent of the population
has access) while access to improved drinking water is
broader (73.4 percent), yet still needs to be improved.
In addition, large portions of the population do not have
access to healthcare services and are not protected by
a social safety net. This is partly the result of the large
informal economy and the fact that almost 80 percent
of the total employed population works in vulnerable
employment. On a more positive note, Senegal appears
to be somewhat less unequal than some rapidly growing
economies. Its income Gini coefficient is 40.3 (a level
similar to that of Turkey)—better, for example, than those
of Ghana or Kenya. The environmental sustainability
pillar, despite an overall performance that is in line
with the GCI, also presents some areas of concern.

Overexploited fish stocks, deforestation, and air and
water pollution are the main problems that Senegalese
authorities need to manage. These issues, which
emerge from the indicators assessed in the sustainable
competitiveness framework, are also mentioned by
the World Wildlife Fund (WWF)—with the addition of
water pollution and overgrazing—as being among the
most prominent environmental problems in Senegal.57
However, the country is attempting to protect the
environment by, for example, creating several protected
land areas and committing to most of the international
environment treaties. Additionally, and partly because of
its level of development, its CO2 emissions are relatively
low. By focusing on these dimensions, Senegal could
achieve a more sustainable development path.
Ghana’s sustainability assessment unveils particular
pressures on the social sustainability pillar where,
despite continued growth, access to improved sanitation
is still very low and the development process has not
yet benefitted large portions of the population that have
vulnerable jobs or work in the informal economy and
do not have access to social security. Additionally, and
partially as a result of this structure, income inequality
is relatively high and on the rise,58 highlighting the noninclusive economic growth in the country. This in turn
could lead to social tensions in the longer term. In terms
of environmental sustainability, Ghana attains a better
result with low CO2 emissions and relatively sustainable
fishing practices. However, some concerns remain. First,
deforestation is depleting natural resources at a rapid
rate. According to the WWF,59 Ghana can sustainably
produce about 1 million cubic meters of timber from
its forest reserves and agricultural lands; however, it is
currently producing much more, and reached a peak
in 2002 when the harvested timber was about four
times the regenerating capacity. In addition to logging,
commercial agriculture is damaging the country’s forest
by clearing the land by means of burning and cutting
wooded areas. Second, mining activity and the use of
agricultural pesticide impacts groundwater by polluting
water streams and aquifers. Third, the pressure on water
resources in areas where the population is growing
quickly is high, while water is not steadily available
throughout the year. This results in water rationing, and
in some cases creates tensions for water access among
citizens. More efficient resource management would
enable Ghana to preserve its natural wealth and improve
the living conditions of its citizens.
CONCLUSIONS AND NEXT STEPS
Sustainable competitiveness is a nascent area of
research. Our initial work has shown that progress on the
conceptual side as well as advances with respect to data
for measuring key concepts will be necessary to better
inform decisions that have implications for the economic,
social, and environmental dimensions of sustainable

competitiveness. In an effort to proceed toward a better
understanding of sustainable competitiveness, this
chapter develops further the conceptual framework for
sustainable competitiveness introduced by the World
Economic Forum in 2011. By combining social and
environmental indicators with the GCI, we have been
able to develop a preliminary framework for measuring
the concept and to carry out a preliminary analysis of
national sustainable competitiveness.
The most important finding of this analysis is
that there is no necessary trade-off between being
competitive and being sustainable. Many countries at
the top of the competitiveness rankings are also the
best performers in many areas of sustainability. Going
forward, economies that are able to balance economic
progress with social inclusion and good and effective
environmental stewardship will most likely experience
higher rates of human progress and prosperity.
Given the complexity of the issue at hand and
important gaps in data to measure key elements of
sustainable competitiveness, the endeavor to measure
sustainable competitiveness has been designed as
a multi-year process. The World Economic Forum
will continue to serve the international community by
providing a neutral multi-stakeholder platform to advance
the understanding and analysis of this important
concept.
One crucial element of this strand of work will
focus on obtaining more and better metrics to fully
assess sustainable competitiveness, as a number
of key concepts still cannot be captured. The World
Economic Forum’s Global Agenda Council on Measuring
Sustainability will work to develop better and more
complete datasets. And as in previous years, the
Advisory Board on Sustainability and Competitiveness
will contribute to improving the conceptual foundations
of sustainable competitiveness and the measurement
methodology going forward.
NOTES
1 See UNDP 2011 for an overview of trends and patterns related to
growth and social and environmental sustainability.
2 References to studies on growth and environment are provided in
note 6 and for studies on growth and inequality in note 26.
3 This definition is from the World Commission on Environment and
Development’s (the Brundtland Commission) report Our Common
Future. This report is commonly known as “the Brundtland
Report.”
4 Porter and van der Linde 1995.
5 Brock and Taylor 2004; Nordhaus 2002; Bovenberg and Smulders
1996; and Acemoglu 2009.
6 Nordhaus 1992.
7 See, for example, Barbier 1997 and Yandle et al. 2000.

8 This conclusion would be misleading for at least three reasons: (1)
the cumulated level of damage and resource scarcity may reach a
critical point before the economy cleans up without interventions,
(2) early damage to the environment might not be reversible and
is not completely neutralized in any case, and (3) a higher level of
income may not be achievable because of a lack of environmental
sustainability.
9 World Bank 2012.
10 Luenberger 1995.
11 See, for example, Worldwatch Institute 2006, issue xxiv.
12 Zivin and Neidell 2011.
13 Information on the Convention on Biological Diversity is available
at https://www.cbd.int/development/.
14 See Rockström 2009.
15 Brink et al. 2012.

42 The lack of some additional indicators, especially in the social
sustainability dimension, constrains the model and does not allow
for a comprehensive measurement of sustainability. For example,
Germany performs well on the social sustainability pillar despite an
existing trend of decreasing wages in Germany where, according
to the Federal Employment Agency, over the past four years the
number of individuals who require state support to get by despite
full- or part-time jobs has increased steadily. Similarly, in Italy,
the Italian National Institute of Statistics (Istat) disseminates the
relative and absolute poverty estimations for households in the
country, based on 2012 Households Budget Survey data. In 2012
the relative poverty incidence was equal to 12.7 percent, whereas
the absolute poverty rate was 6.8 percent. These dimensions,
although measured at country level in advanced economies, are
not measured worldwide. Additionally, because poverty thresholds
change from country to country, it is difficult to establish a crosscountry comparison. The Gini index variable does not yet capture
similar phenomena in the assessed countries.
43 The lack of access to basic necessities indicates a state of
poverty.

16 See, for example, Marshal et al. 1997.
17 UNEP 2011.

44 For more information about the Executive Opinion Survey, please
see Chapter 1.3 of this Report.

18 Gross and Ringbeck 2008.

45 These are not covered by this framework; see Box 3.

19 World Bank News 2011.

46 This aspect of social sustainability is not fully reflected in the
quantitative measurements because of a lack of available data.

23 For an exhaustive review of the issue, see Colantonio 2011.
24 World Economic Forum 2013.
25 For an overview on the income inequality problem, see OECD
2011; Mankiw 2013; and Stiglitz 2012.
26 See, for example, Perotti 1993; Bertola 1993; Alesina and Rodrik
1994; Persson and Tabellini 1994; and Green et al. 2006.
27 OECD 2012.
28 IEA 2012.
29 Spedding et al. 2013.
30 Sexton et al. 2008.
31 See Raleigh and Urdal 2009 for further discussion of this topic.
32 UNCTAD 2011b.
33 See Bäthge 2010 for further discussion of climate change and
women’s empowerment.
34 See the World Economic Forum 2012b for an assessment of how
Europe is faring in meeting these goals.
35 For more information on this index, see www.oecdbetterlifeindex.
org/.
36 See http://hdr.undp.org/en/.
37 For more information on the EPI, see http://www.epi.yale.edu/.
38 See http://www.footprintnetwork.org/en/index.php/GFN/page/
methodology/ for information about information about the Global
Footprint Network.

49 English.news.cn, China. 2013. “China to Introduce Carbon Tax:
Official.” February 19. Available at http://news.xinhuanet.com/
english/china/2013-02/19/c_132178898.htm.
50 See World Resources Institute 2002.
51 Another problematic area contributing to environmental
degradation is the lack of waste management, which, because
of a lack of data, is not captured in the pillars. As landfills are still
the most common way to dispose of waste, growing population
and growing consumption are leading to an increase in the size
of landfills. This in turn hinders natural areas from being able to
sustain life.
52 See the Government of India, Ministry of Home Affairs, available
at http://mha.nic.in/par2013/par2013-pdfs/rs-080513/592.pdf;
this is based on the Manual for Drought Management published
by Department of Agriculture and Cooperation, Ministry of
Agriculture, available at http://mha.nic.in/par2013/par2013-pdfs/
rs-080513/592.pdf.
53 See the Government of India, Ministry of Water Resources 2010.
54 Calvani 2007.
55 World Bank 2013.
56 See SCGH (Sierra Club GreenHome), “The Cleanest and
Most Polluted Cities in the World.“ Available at http://www.
sierraclubgreenhome.com/green-news/the-cleanest-and-themost-polluted-cities/#sthash.LFwWAd6b.dpuf.
57 See WWF (World Wildlife Fund). “Environmental Problems in
Senegal: Fished Out and Running Dry.” Available at http://wwf.
panda.org/who_we_are/wwf_offices/senegal/environmental_
problems__in_senegal/.

39 Information about the Global Adaptation Index is available at
http://index.gain.org/.

58 Ghana Business News 2011.

40 The World Bank’s Worldwide Governance Indicators Framework is
available at http://info.worldbank.org/governance/wgi/index.asp.

59 See http://wwf.panda.org/who_we_are/wwf_offices/ghana/
problems/.

41 Information about the Decent Work initiative is available at http://
www.ilo.org/integration/themes/mdw/lang--en/index.htm.

As described in the text, the two areas of sustainability—
social and environmental—are treated as independent
adjustments to each country’s performance in the
Global Competitiveness Index (GCI). The adjustment is
calculated according to the following steps.
AGGREGATION
In the first step, the individual indicators in each area
are normalized on a 1-to-7 scale and aggregated by
averaging the normalized scores, such that a social
sustainability score and an environmental sustainability
score are calculated for each country.
In the second step, these scores are normalized
again on a 0.8-to-1.2 scale,a which is based on the
distribution of each of the two sustainability components.
The purpose of this methodology is to reward the
countries attaining a relatively good performance on
the two sustainability components while penalizing
those that register a poor performance. Applying this
methodology corresponds to transforming actual
averages into coefficients ranging from 0.8 to 1.2. For
example, the worst performer on the social sustainability
pillar obtains a score of 0.8 and the best performer a 1.2.
The same calculation is conducted for the environmental
sustainability pillar.
Normalizing on a 0.8-to-1.2 scale and using the
actual sample maximum and minimum are corroborated
by the statistical distribution of the data, so as to ensure
that the final data are not skewed. In the absence of
empirical evidence, the selection of the impact limits
(0.8–1.2) relies on the best judgment of the authors
and is based on the assumption that countries can
experience either an opportunity if they manage their
resources well or a weakness if they do not.
The selection of this methodology is not intended
to be scientific, but it represents a normative approach
aimed at stimulating discussions on policy priorities and
possibly stimulating scientific research in this field.
In the third step, the GCI score of each country
is multiplied twice: once by its social sustainability
coefficient and once by its environmental sustainability
coefficient, to obtain two separate sustainabilityadjusted GCI scores. Finally, an average of the two
scores provides an overall measure of the sustainability
adjustment.

78 | The Global Competitiveness Report 2013–2014

STRUCTURE OF THE SUSTAINABILITY PILLARS
The computation of the sustainability components is
based on an arithmetic mean aggregation of scores from
the indicator level.b
Variables that are not derived from the Executive
Opinion Survey (the Survey) are identified by an asterisk
(*) in the following pages. To make the aggregation
possible, these variables are transformed into a 1-to-7
scale in order to align them with the Survey results. We
apply a min-max transformation, which preserves the
order of, and the relative distance between, country
scores.c
Indicators marked with a “(log)” subscript are
transformed applying the logarithm (base 10) to the raw
score.
Social sustainability pillar
S01 Income Gini index*
S02 Youth unemployment*
S03 Access to sanitation* d(log)
S04 Access to improved drinking water* d
S05 Access to healthcared
S06 Social safety net protection
S07 Extent of informal economy
S08 Social mobility
S09 Vulnerable employment*
Environmental sustainability pillar
S10 Stringency of environmental regulation e
S11 Enforcement of environmental regulation e
S12 Terrestrial biome protection*
S13 No. of ratified international environmental treaties*
S14 Agricultural water intensity*
S15 CO2 intensity*(log)
S16 Fish stocks overexploited*(log)
S17 Forest cover change*
S18 Particulate matter (2.5) concentration*(log)
S19 Quality of the natural environment

NOTES
a Formally we have
0.4 x

(

country score – sample minimum
sample maximum – sample minimum

)

+ 0.8

The sample minimum and sample maximum are, respectively, the
lowest and highest country scores in the sample of economies
covered by the sustainability-adjusted GCI in each pillar.

The sample minimum and sample maximum are, respectively, the
lowest and highest country scores in the sample of economies
covered by the sustainability-adjusted GCI. In some instances,
adjustments were made to account for extreme outliers. For those
indicators for which a higher value indicates a worse outcome
(e.g., CO2 emission, income Gini index), the transformation
formula takes the following form, thus ensuring that 1 and 7 still
corresponds to the worst and best possible outcomes, best
possible outcomes, respectively:
–6 x

(

country score – sample minimum
sample maximum – sample minimum

)

+ 7

d Variables S03, S04, and S05 are combined to form one single
variable.
e Variables S10 and S11 are combined to form one single variable.

The data in this Report represent the best available
estimates from various national authorities, international
agencies, and private sources at the time the Report
was prepared. It is possible that some data will have
been revised or updated by the sources after publication.
Throughout the Report, “n/a” denotes that the value is
not available or that the available data are unreasonably
outdated or do not come from a reliable source.
For each indicator, the title appears on the first line,
preceded by its number to allow for quick reference. The
numbering is the same as the one used in Appendix A.
Below is a description of each indicator or, in the case
of Executive Opinion Survey data, the full question and
associated answers. If necessary, additional information
is provided underneath.
S01 Income Gini coefficient
Measure of income inequality (0 = perfect equality; 100 =
perfect inequality) | 2011 or most recent available
This indicator measures the extent to which the distribution of
income among individuals or households within an economy
deviates from a perfectly equal distribution. A Lorenz curve plots
the cumulative percentages of total income received against
the cumulative number of recipients, starting with the poorest
individual. The Gini index measures the area between the Lorenz
curve and a hypothetical line of absolute equality, expressed as a
percentage of the maximum area under the line. Thus a Gini index
of 0 represents perfect equality, while an index of 100 implies
perfect inequality.
Sources: The World Bank, World Development Indicators Online
(retrieved May 27, 2013); US Central Intelligence Agency, The
World Factbook (retrieved June 6, 2013); national sources

S02 Youth unemployment
Percent of total unemployed youth to total labor force aged
15–24 | 2010 or most recent available
Youth unemployment refers to the share of the labor force aged
15–24 without work but available for and seeking employment.
Sources: International Labour Organization, Key Indicators of the
Labour Markets Net (retrieved June 5, 2013) ;The World Bank,
World Development Indicators Online (retrieved May 27, 2013);
national sources

S03 Access to sanitation

S04 Access to improved drinking water
Percent of the population with access to improved drinking
water | 2011 or most recent available
Share of the population with reasonable access to an adequate
amount of water from an improved source, such as a household
connection, public standpipe, borehole, protected well or spring,
or rainwater collection. Unimproved sources include vendors,
tanker trucks, and unprotected wells and springs. Reasonable
access is defined as the availability of at least 20 liters per person
per day from a source within 1 kilometer of the dwelling.
Source: World Health Organization, World Health Statistics 2013
(online database retrieved June 5, 2013)

S07 Extent of informal economy
How much economic activity in your country would you
estimate to be undeclared or unregistered? [1 = most economic
activity is undeclared or unregistered; 7 = most economic
activity is declared or registered] | 2012–2013 weighted average
Source: World Economic Forum, Executive Opinion Survey, 2012
and 2013 editions

S08 Social mobility
To what extent do individuals in your country have the
opportunity to improve their economic situation through their
personal efforts regardless of the socioeconomic status of
their parents? [1 = little opportunity exists to improve one’s
economic situation; 7 = significant opportunity exists to
improve one’s economic situation] | 2012–2013 weighted
average
Source: World Economic Forum, Executive Opinion Survey, 2012
and 2013 editions

Percent of total population using improved sanitation facilities |
2011 or most recent available
Share of the population with at least adequate access to
excreta disposal facilities that can effectively prevent human,
animal, and insect contact with excreta. Improved facilities
range from simple but protected pit latrines to flush toilets with a
sewerage connection. To be effective, facilities must be correctly
constructed and properly maintained.
Source: World Health Organization, World Health Statistics 2013
(online database, retrieved June 5, 2013)

Proportion of own-account and contributing family workers in
total employment | 2011 or most recent year available

Total number of ratified environmental treaties | 2012
This variable measures the total number of international treaties
from a set of 25 for which a state is a participant. A state is
acknowledged as a “participant” whenever its status for each
treaty appears as “Ratified,” “Accession,” or “In Force.” The
treaties included are: the International Convention for the
Regulation of Whaling, 1948 Washington; the International
Convention for the Prevention of Pollution of the Sea by Oil, 1954,
as amended in 1962 and 1969, 1954 London; the Convention
on Wetlands of International Importance especially as Waterfowl
Habitat, 1971 Ramsar; the Convention Concerning the Protection
of the World Cultural and Natural Heritage, 1972 Paris; the
Convention on the Prevention of Marine Pollution by Dumping of
Wastes and Other Matter, 1972 London, Mexico City, Moscow,
Washington; the Convention on International Trade in Endangered
Species of Wild Fauna and Flora, 1973 Washington; the
International Convention for the Prevention of Pollution from Ships
(MARPOL) as modified by the Protocol of 1978, 1978 London;
the Convention on the Conservation of Migratory Species of Wild
Animals, 1979 Bonn; the United Nations Convention on the Law
of the Sea, 1982 Montego Bay; the Convention on the Protection
of the Ozone Layer, 1985 Vienna; the Protocol on Substances
that Deplete the Ozone Layer, 1987 Montreal; the Convention on
the Control of Transboundary Movements of Hazardous Wastes
and their Disposal, 1989 Basel; the International Convention
on Oil Pollution Preparedness, Response and Co-operation,
1990 London; the United Nations Framework Convention on
Climate Change, 1992 New York; the Convention on Biological
Diversity, 1992 Rio de Janeiro; the International Convention to
Combat Desertification in Those Countries Experiencing Serious
Drought and/or Desertification, particularly Africa, 1994 Paris; the
Agreement relating to the Implementation of Part XI of the United
Nations Convention on the Law of the Sea of 10 December
1982, 1994 New York; the Agreement relating to the Provisions
of the United Nations Convention on the Law of the Sea relating
to the Conservation and Management of Straddling Fish Stocks
and Highly Migratory Fish Stocks, 1995 New York; the Kyoto
Protocol to the United Nations Framework Convention on the
Climate Change, Kyoto 1997; the Rotterdam Convention on
the Prior Informed Consent Procedure for Certain Hazardous
Chemicals and Pesticides in International Trade, 1998 Rotterdam;
the Cartagena Protocol of Biosafety to the Convention on
Biological Diversity, 2000 Montreal; the Protocol on Preparedness,
Response and Co-operation to Pollution Incidents by Hazardous
and Noxious Substances, 2000 London; the Stockholm
Convention on Persistent Organic Pollutants, 2001 Stockholm;
the International Treaty on Plant Genetic Resources for Food
and Agriculture, 2001 Rome; the International Tropical Timber
Agreement, 2006 Geneva.

Vulnerable employment refers to unpaid family workers and ownaccount workers as a percentage of total employment—that
is, the share of own-account and contributing family workers in
total employment. A contributing family worker is a person who
is self-employed in a market-oriented establishment operated by
a related person living in the same household, and who cannot
be regarded as a partner because of the degree of his or her
commitment to the operation of the establishment, in terms of
the working time or other factors to be determined by national
circumstances, is not at a level comparable with that of the head
of the establishment.
Source: The World Bank, World Development Indicators Online
(retrieved May 26, 2013)

S10 Stringency of environmental regulations
How would you assess the stringency of your country’s
environmental regulations? [1 = very lax ; 7 = among the
world’s most stringent] | 2012–2013 weighted average
Source: World Economic Forum, Executive Opinion Survey, 2012
and 2013 editions

S11 Enforcement of environmental regulations
How would you assess the enforcement of environmental
regulations in your country? [1 = very lax ; 7 = among the
world’s most rigorous] | 2012-2013 weighted average
Source: World Economic Forum, Executive Opinion Survey, 2012
and 2013 editions

S12 Terrestrial biome protection
Degree to which a country achieves the target of protecting 17
percent of each terrestrial biome within its borders | 2010 or
most recent year available
This indicator is calculated by CIESIN (Columbia University’s
Center for International Earth Science Information Network)
by overlaying the protected area mask on terrestrial biome
data developed by the World Wildlife Fund (WWF)’s Terrestrial
Ecoregions of the World for each country. A biome is defined as
a major regional or global biotic community, such as a grassland
or desert, characterized chiefly by the dominant forms of plant
life and the prevailing climate. Scores are capped at 17 percent
per biome such that higher levels of protection of some biomes
cannot be used to offset lower levels of protection of other
biomes, hence the maximum level of protection a country can
achieve is 17 percent. CIESIN uses time series of the World
Database on Protected Areas (WDPA) developed by the United
Nations Environment Programme (UNEP) World Conservation
Monitoring Centre (WCMC) in 2011, which provides a spatial time
series of protected area coverage from 1990 to 2010. The WCMC
considers all nationally designated protected areas whose location
and extent is known. Boundaries were defined by polygons
where available, and where they were not available protected area
centroids were buffered to create a circle in accordance with the
protected area size. The WCMC removed all overlaps between
different protected areas by dissolving the boundaries to create a
protected areas mask.

Source: The International Union for Conservation of Nature (IUCN)
Environmental Law Centre ELIS Treaty Database

Agricultural water withdrawal as a percent of total renewable
water resources | 2009 or most recent year available
Agricultural water withdrawal as a percent of total renewable
water resources is calculated as: 100 × agricultural water
withdrawal / total renewable water resources. In turn, total
renewable = surface renewable water + renewable water
resources groundwater – overlap between surface and
groundwater. Where available, this indicator includes water
resources coming from desalination used for agriculture (as in
Kuwait, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain,
and Spain).
Source: FAO AQUASTAT database, available at http://www.fao.
org/nr/water/aquastat/main/index.stm (retrieved May 24, 2013)

Population-weighted exposure to PM2.5 in micro-grams per
cubic meter, based on satellite data | 2009

Carbon dioxide (CO2) emissions are those stemming from the
burning of fossil fuels and the manufacture of cement. They
include CO2 produced during consumption of solid, liquid, and
gas fuels and gas flaring. Energy use refers to use of primary
energy before transformation to other end-use fuels, which is
equal to indigenous production plus imports and stock changes,
minus exports and fuels supplied to ships and aircraft engaged in
international transport. A logarithm transformation is applied to the
ratio of these statistics in order to spread the data distribution.

This indicator is based on satellite data that are then converted
to ground-level concentrations using the GEOS-Chem global
chemical transport model to account for the meteorological and
chemical factors that influence the spatially and temporally varying
relationship between column and surface concentrations. The 0.1
× 0.1 resolution aerosol optical depth (AOD) values for 2001–05
are derived from the NASA Terra MODIS and MISR sensors,
averaged to get a six-year mean AOD for each grid cell, and
then population-weighted to better represent human exposure
by country. PM2.5 concentrations were averaged over the period
2001–05 and the grid was resampled to match the Global RuralUrban Mapping Project 1 kilometer population grid. The weighted
average of the values in each grid cell was used to derive a
country total exposure to PM2.5 in micrograms per cubic meter. A
logarithm transformation is applied to these statistics in order to
spread the data distribution.

Source: The World Bank, World Development Indicators Online
(retrieved May 27, 2013)

S16 Fish stocks overexploited
Fraction of country’s exclusive economic zone with
overexploited and collapsed stocks | 2006
The See Around Us (SAU) project‘s Stock Status Plots (SSPs)
are created in four steps (Kleisner and Pauly, 2011). In the first
step, SAU defines a stock as a taxon (at the species, genus, or
family level of taxonomic assignment) that occurs in the catch
records for at least 5 consecutive years, over a minimum span of
10 years, and that has a total catch in an area of at least 1,000
tonnes over the time span. In the second step, SAU assesses
the status of the stock for every year relative to the peak catch.
SAU defines five states of stock status for a catch time series.
This definition is assigned to every taxon that meets the definition
of a stock for a particular spatial area (e.g., exclusive economic
zones, or EEZs). These states are: (1) Developing—before the
year of peak catch and less than 50 percent of the peak catch; (2)
Exploited—before or after the year of peak catch and more than
50 percent of the peak catch; (3) Overexploited—after the year of
peak catch and less than 50 percent but more than 10 percent of
the peak catch; (4) Collapsed—after the year of peak catch and
less than 10 percent of the peak catch; and (5) Rebuilding—after
the year of peak catch and after the stock has collapsed, when
catch has recovered to between 10 percent and 50 percent of
the peak. In the third step, SAU graphs the number of stocks
by status in a given year by tallying the number of stocks in a
particular state and presenting these as percentages. In the final
step, the cumulative catch of stock by status in a given year
is summed over all stocks and presented as a percentage in
the catch by stock status graph. The combination of these two
figures represents the complete Stock Status Plot. The numbers
for this indicator are taken from the overexploited and collapsed
numbers of stocks over total numbers of stocks per EEZ. A
logarithm transformation is applied to these statistics in order to
spread the data distribution.

S19 Quality of natural environment
How would you assess the quality of the natural environment in
your country? [1 = extremely poor; 7 = among the world’s most
pristine] | 2012–2013 weighted average
Source: World Economic Forum, Executive Opinion Survey, 2012
and 2013 editions

Source: Yale University and Columbia University, Environmental
Performance Index (EPI) 2012 edition based on Sea Around Us
data

S17 Forest cover change
Average percent change in forest area per year between
1990 and 2010 | 2010
This measure represents the percent change in forest area,
applying a 10 percent crown cover as the definition of forested
areas, between time periods. We used total forest extent rather
than the extent of primary forest only. The change measure is
calculated from forest area data in 1995, 2000, 2005, and 2010.
The data are reported by national governments, and therefore
methods and data sources may vary from country to country.
Positive values indicate afforestation or reforestation, and negative
values represent deforestation.
Source: Yale University and Columbia University, Environmental
Performance Index (EPI) 2012 edition based on FAO data

The Executive
Opinion Survey:
The Voice of the
Business Community
CIARA BROWNE
THIERRY GEIGER
TANIA GUTKNECHT

World Economic Forum

The Global Competitiveness Report continues
to be a highly respected assessment of national
competitiveness. To conduct this work, the World
Economic Forum relies on a large set of data sourced
from various international organizations and from its own
annual Executive Opinion Survey (the Survey).
The Survey, administered each year in over
140 economies, captures valuable information on a
broad range of factors that are critical for a country’s
competitiveness and sustainable development, and for
which data sources are scarce or, frequently, nonexistent
on a global scale. Among several examples of otherwiseunavailable data are the quality of the educational
system, indicators measuring business sophistication,
and labor market variables such as flexibility in wage
determination.
The Survey results are used in the calculation
of the Global Competitiveness Index (GCI) and other
Forum indexes, including the Networked Readiness
Index, the Enabling Trade Index, the Travel & Tourism
Competitiveness Index, the Financial Development
Index, and the Gender Gap Index, as well as in regional
studies.1 A truly unique source of information, the Survey
data have also long served a number of international
and national organizations, government bodies, and
academia as well as the private sector to inform policy
work, strategies, and investment decisions. For example,
Transparency International uses the Survey data for the
elaboration of their Corruption Perceptions Index and the
Bribe Payers Index. Institutions such as the Organisation
for Economic Co-operation and Development, the World
Bank, and the International Monetary Fund also refer
to these data in their publications, as do a number of
academic publications. Finally, an increasing number of
national competitiveness reports also draw on or refer to
the Survey data.
THE SURVEY IN NUMBERS
The World Economic Forum has conducted its annual
Survey for over 30 years, making it the longest-running
and most extensive survey of its kind. This year’s Survey
captured the opinions of over 13,000 business leaders in
148 economies between January and May 2013.
Following the data-editing process (see below), a
total of 13,638 surveys were retained for 144 countries.2
This represents an average of 94.7 respondents per
country, while the median country sample size is 85.5
responses. Given the extent of the Survey’s country
coverage and in order to maximize its outreach, it is
available in 41 languages.3
Geographic expansion
Since the first edition of the World Economic Forum
report on competitiveness in 1979, country coverage has
expanded from 16 European countries to 148 economies
worldwide for this edition, together accounting for over

reinstated following a year of non-inclusion. Tajikistan
and Syria, however, are not included in this year’s edition
owing to the inability to conduct a survey in these two
countries.4 The Forum’s Global Competitiveness and
Benchmarking Network continues its efforts to increase
country coverage year on year.

Circling 1 ... means you agree completely with the answer
on the left-hand side
Circling 2 ... means you largely agree with the lefthand side
Circling 3 ... means you somewhat agree with the lefthand side
Circling 4 ... means your opinion is indifferent between
the two answers
Circling 5 ... means you somewhat agree with the righthand side
Circling 6 ... means you largely agree with the right-hand
side
Circling 7 ... means you agree completely with the answer
on the right-hand side

99 percent of the world’s gross domestic product
(GDP; see Figure 1). In the 2013 edition, three additional
economies are included: Bhutan, Lao PDR, and
Myanmar. Furthermore, Angola and Tunisia have been

represents the worst possible situation; at the other end
of the scale, 7 represents the best (see Box 1 for an
example).
The administration of the Survey could not be
carried out without the network of over 160 Partner
Institutes worldwide. Partner Institutes are recognized
research or academic institutes, business organizations,
national competitiveness councils, or other renowned
professional entities and, in some cases, survey
consultancies (for the full list, see the Partner Institutes
section at the beginning of the Report).5 They are
selected on the basis of their capacity to reach out
to the business community, their reputation, and their
commitment to the issue of competitiveness.
In administering the Survey, Partner Institutes
are asked to follow detailed sampling guidelines to
ensure that the sample of respondents is the most
representative and comparable across the globe and
in a specific timeframe. The sampling guidelines have
evolved over time and are based on best practices in
the field of survey administration and on discussion with
survey experts. The Survey sampling guidelines specify
that the Partner Institute should build a “sample frame”—
that is, a list of potential business executives from smalland medium-sized enterprises and large companies—
from the various sectors of activity as stated below. It
then applies a dual stratification procedure based on
these two criteria of company size and sector. More
specifically, the Partner Institutes are asked to carry out
the following steps:
1.

Prepare a sample frame, or large list of potential
respondents, which includes firms representing
the main sectors of the economy (agriculture,
manufacturing industry, non-manufacturing
industry, and services).

2.

Separate the frame into two lists: one that
includes only large firms, and a second list that
includes all other firms (both lists representing the
various economic sectors).6

3.

Based on these lists, and in view of reducing
survey bias, choose a random selection of these
firms from both lists to receive the Survey.

Furthermore, the sampling guidelines specify that
the Partner Institute should aim to collect a combination
of random respondents with some repeat respondents
for further comparative analysis.7 Partner Institutes are
asked to collect between 80 and 100 surveys, although
generally accepted practice in sampling as well as
recommendations received from Gallup has led to a
cut-off of a minimum of 30 surveys per country. We are
working closely with the Partner Institutes to increase the
sample size for countries that have collected a number

of surveys just above the cut-off. The administration of
the Survey may take a variety of formats, including faceto-face interviews with business executives and mailed
or telephone interviews, with an online survey option as
an alternative.
For energy, time, and cost considerations, the
Forum encourages the use of the online survey tool,
which was available this year in 20 languages. The share
of online participation has significantly increased over
the years and has now reached almost 40 percent of all
responses, up by 10 percent in just two years. This year,
the Survey was administered entirely via the online tool
in 19 economies (Argentina, Barbados, Belgium, Bolivia,
the Czech Republic, El Salvador, Estonia, Finland,
Georgia, Iceland, Iran, Ireland, Israel, Latvia, Malta,
Norway, Puerto Rico, Switzerland, and Venezuela), while
the use of the online tool exceeded 90 percent in 18
further economies (see Table 1).
The Partner Institutes also take an active and
essential role in disseminating the findings of The Global
Competitiveness Report and other reports published by
The Global Competitiveness and Benchmarking Network
by holding press events and workshops to highlight the
results at the national level to the business community,
the public sector, and other stakeholders.
Following an initial external audit by a team of
survey experts from Gallup in 2008, a second review
was conducted by Gallup in 2012, during which the
Survey instrument, the sampling guidelines, and the
administration process underwent a thorough inspection.
After five years of implementing the recommendations
from the first audit, it was time to take a further twofold
approach by analyzing the recommendations and their
impact on the process as well as keeping up to date on
best practices in the field of surveying.
Overall, the outcome of the review regarding the
implementation of the 2008 recommendations was
commended. The audit determined that the Executive
Opinion Survey process follows best practices and
has made the recommended improvements to the
Survey tool and translations, as well as to the sampling
quality. The 2012 audit addressed an important aspect
related to the impact of national culture—the so-called
cultural bias—that may impact interviewee responses.
The Global Competitiveness and Benchmarking
Network recognizes this as a possibility; nonetheless,
following international best practices and upon Gallup’s
recommendation, it was decided not to re-weight the
data using anchoring mechanisms because of the
limited effectiveness of such a procedure and to prevent
adding further noise to the data. However, and as a
step to follow best practices to help minimize possible
language-based biases found in data collected via a
single language survey, the number of languages for the
Executive Opinion Survey is ever increasing, reaching 41
for this edition.

With the aim of continually improving the Survey tool
and processes, and following expert recommendations,
the Survey was made shorter and the terminology
simplified. An Executive Opinion Survey administration
manual is also being developed for the Partner Institutes.
With such ongoing efforts in the realm of survey
administration best practice, The Global Competitiveness
and Benchmarking Network team continues to
improve processes to achieve greater data quality and
heightened comparability across economies.
DATA TREATMENT AND SCORE COMPUTATION
This section details the process whereby individual
responses are edited and aggregated in order to
produce the scores of each economy on each individual
question of the Survey. These results, together with other
indicators obtained from other sources, feed into the GCI
and other projects.8
Data editing
Prior to aggregation, the respondent-level data are
subjected to a careful editing process. The first
editing rule consists of excluding those surveys with a
completion rate inferior to 50 percent.9 This is because
a partially completed survey probably demonstrates a
lack of sufficient focus on the part of the respondent. In
a second step, a multivariate outlier analysis is applied
to the data using the Mahalanobis distance technique.
This test assesses whether each individual survey
is representative, given the overall sample of survey
responses in the specific country, and allows for the
deletion of clear outliers.
More specifically, the Mahalonobis distance test
estimates the likelihood that one particular point of N
dimensions belongs to a set of such points. One
single survey made up of N answers can be viewed
as the point of N dimensions, while a particular country
sample c is the set of points. The Mahalanobis
distance is used to compute the probability that
any survey i does not belong to the sample c. If the
probability is high enough—we use 99.9 percent as
the threshold—we conclude that the survey is a clear
outlier and does not “belong” to the sample. The
implementation of this test requires that the number of
responses in a country be greater than the number of
answers, N, used in the test. The test uses 65 questions,
selected by their relevance and placement in the Survey
instrument.
A univariate outlier test is then applied at the
country level for each question of each survey. We use
the standardized score—or “z-score”—method, which
indicates by how many standard deviations any one
individual answer deviates from the mean of the country
sample. Individual answers with a standardized score
Zi,q,c greater than 3 are dropped.

88 | The Global Competitiveness Report 2013–2014

Data weighting: Sector-weighted country averages
Once the data have been edited, individual answers
are aggregated at the country level. We compute
sector-weighted country averages to obtain a more
representative average that takes into account the
structure of a country’s economy. The structure is
defined by the estimated contributions to a country’s
GDP of each of the four main economic sectors:
agriculture, manufacturing industry, non-manufacturing
industry, and services (see Table 2).10
An additional step is taken to prevent individual
responses within a sample from receiving excessive
weight when the structure of the sample and the
underlying economy differ greatly. As an extreme
example, imagine the case of a country where just 3
percent of responses come from the services sector,
but that sector actually represents 90 percent of the
country’s economy. By applying the above sectorweighting scheme, we would be giving a very high
weight to a very few surveys. This is avoided by
“trimming” the sector weights. When, for a particular
country, the ratio of the weight of one sector in the
economy to the percentage of surveys from that
sector in the country sample exceeds 5, the sector
weight used for the weighted average is capped to
five times the percentage of surveys from that sector
in the sample. The weights of the other sectors are
then adjusted proportionally to their weight in the
country’s GDP.
Formally, the sector-weighted average
of a Survey
S
w s,c q i,s,cas
indicator i for country c, denoted q i,c =
, is
computed
s
follows:
q i,c =
q i,c =
with

q i,s,c =
q i,s,c =

S

ww

S
s

s,c
s,c

q i,s,c
q i,s,c

s

N s,c
N s,c

j

j

q i,s,c =

N s,c

j

q i,j,s,c
N s,c

q i,j,s,c
qNi,j,s,c
s,c
,
N s,c

where
ws,c is sector s’s contribution to the economy of
country c;
qi,s,c is the mean of the answers to question i from
sector s in country c;
qi,j,s,c is the answer to question i from respondent j in
sector s in country c; and
Ns,c is the number of responses from sector s in
country c.
When, for a given country, the sample size is too
small or the sectoral representation of the sample is
too different from the actual structure in the economy,
the mechanism described above might not be sufficient
to prevent an individual response from receiving a
disproportionate weight.11 In such a case the economic
sector stratification average is abandoned and a simple
average of the surveys is applied, where all individual
responses contribute equally to the country score

0.453 3.57 0.547 3.82 3.71
As described in the text, there
2012 are a number
2013 of exceptions to the approach described above. In describing them below, we
use actual years—rather than letters—in equations for the sake of concreteness.
In the case of Survey questions that were introduced in 2013, where, by definition, no past data exist, the weight applied
is wc2012 = 0 and wc2013 = 1. Equation (1) simply is qi,c2012–13 = qi,c2013. The same is true for those countries that are newly covered
(Bhutan, Lao PDF, and Myanmar) and reinstated (Angola and Tunisia) in 2013. For these countries too we use qi,c2012–13 = qi,c2013.
lower bound = Q1 – 1.5 IQR
In the case of countries that failed the inter-year robustness check, the weight applied is wc2012 = 1 and wc2013 = 0, so that
upper bound =2012–13
Q3 – 1.52012 IQR
Equation (1) simply becomes qi,c
= qi,c . In the case of countries that failed the inter-year robustness check last year and
for which the 2012 data were discarded, we use the Survey data from 2011 instead, and combine them with those of 2013 to
compute the scores. Equation (1) then becomes qi,c2011,2013 = wc2011 qi,c2011 wc2013 qi,c2013.
Example
For this example, we compute the score of Panama for indicator 7.03 Hiring and firing practices, which is derived from the
following Survey question: “In your country, how would you characterize the hiring and firing of workers? [1 = heavily impeded
by regulations; 7 = extremely flexible].” This question is not a new question, and Panama did not fail the inter-year robustness
test either this year or last year. Therefore, the general case of Equation (1) applies. Panama’s score was 3.57 in 2012 and 3.82
in 2013. The weighting scheme described above indicates how the two scores are combined. In Panama, the size of the sample
was 133 in 2012 and 130 in 2013. Using = 0.6 and applying Equations (2a) and (2b) yields weights of 45.3 percent for 2012
and 54.7 percent for 2013 (see Table 1). The final country score for this question is given by Equation (1):
(Cont’d.)

discounted-past
average is, the 2012 score of country
corresponds to a discount
factor ofweighted
2/3. That
c
is given
2/3 of the weight given to the 2013
sample-size
weighted
average
0.547 3.82 3.71
0.453
3.57
score. One additional characteristic of this approach is that it prevents a country
sample
that
is much larger in one year from
2012
2013
overwhelming the smaller sample from the other year.
The formula is easily generalized. For any two consecutive
editions t1 and
t of the Survey, country c’s final score on
N ct
N ct 2
t
t
t
t
1
1
t –t
question qi is
computed
as follows:

This is the final score used in the computation of the GCI and reported in Table 7.03 (see page 490). Although numbers
are rounded to two decimal places in this example and to one decimal place in the data tables, exact figures are used in all
calculations.
lower bound = Q1 – 1.5 IQR

upper bound = Q3 – 1.5 IQR

regardless of the sector of activity of the respondents’
companies. In 2013, this was the case for seven
countries: Angola, Bahrain, El Salvador, Finland, Kuwait,
Seychelles, and Venezuela.
Data weighting: Moving average
As a final step, the sector-weighted country averages for
2013 are combined with the 2012 averages to produce
the country scores that are used for the computation of
the GCI 2013–2014 and for other projects.
This moving average technique, introduced in 2008,
consists of taking a weighted average of the most recent
year’s Survey results together with a discounted average
of the previous year. There are several reasons for doing
this. First, it makes results less sensitive to the specific
point in time when the Survey is administered. Second,
it increases the amount of available information by
providing a larger sample size. Additionally, because the
Survey is carried out during the first quarter of the year,
the average of the responses in the first quarter of 2012
and first quarter of 2013 better aligns the Survey data
with many of the data indicators from sources other than
the Survey, which are often year-average data.
For newly introduced questions, for which no time
series exists, the final country score corresponds to
the country score in 2013. This year, this is the case
for indicators 6.04 Effect of taxation on incentives to
invest, 7.05 Effect of taxation on the incentive to work,
7.08 Country capacity to retain talent, and 7.09 Country
capacity to attract talent, which are derived from four
Survey questions introduced in 2013 to replace two
double-barreled questions on the capacity to attract and
retain talent and on the effect of taxation on incentives to
invest and work, respectively.
To calculate the moving average, we use a weighting
scheme composed of two overlapping elements. On one
hand, we want to give each response an equal weight
and, therefore, place more weight on the year with the
larger sample size. At the same time, we would like to
give more weight to the most recent responses because
they contain more updated information. That is, we also
“discount the past.” Table 1 reports the exact weights

used in the computation of the scores of each country,
while Box 2 details the methodology and provides a
clarifying example.
Inter-year robustness test and trend analysis
The two tests described above address variability issues
among individual responses in a country. Yet they were
not designed to track the evolution of country scores
across time. We therefore carry out an analysis to assess
the reliability and consistency of the Survey data over
time. As part of this analysis, we run an inter-quartile
range test, or IQR test, to identify large swings—positive
and negative—in the country scores. More specifically,
for each country we compute c as the average difference
in country scores across all the Survey questions. We
then compute the inter-quartile range (i.e., the difference
between the 25th percentile and the 75th percentile),
denoted iq, of the sample of 148 economies. Any value
c lying outside the range bounded by the 25th percentile
minus 1.5 times iq and the 75th percentile plus 1.5 times
iq is identified as a potential outlier. Formally, we have:
lower bound = Q1 – 1.5 IQR
upper bound = Q3 – 1.5 IQR
where
Q1 and Q3 correspond to the 25th and 75th
percentiles of the sample, respectively, and
IQR is the difference between these two
values.
In addition to this test, we conduct an analysis of the
evolution in the results over the past five editions and
also consider the latest developments in all countries
displaying large swings.
Based on this quantitative and qualitative
analyses, the 2013 Survey data collected in Bosnia
and Herzegovina, Jordan, Oman, and the United
Arab Emirates appear to deviate significantly from the
historical trends, and recent developments in these
countries do not seem to provide enough justification
for the large swings observed. For these four countries,
therefore, we use only the 2012 Survey data in the
computation of this year’s GCI. Although this remains

a remedial measure, we will continue to investigate
the situation over the coming months in an effort to
improve the representativeness of the Survey data in
these countries. Last year, the same analysis resulted
in the Survey data of four countries—Ecuador, Georgia,
Rwanda, and Sri Lanka—being removed. This year, as
an intermediate step toward the re-establishment of the
standard computation method, we used a weighted
average of the Survey data of 2011 for these countries—
that is, the edition preceding the problematic one—and
2013.
CONCLUSION
The World Economic Forum’s Executive Opinion Survey
remains the largest poll of its kind, capturing the insight
of more than 13,000 executives into critical drivers of
their respective countries’ development. This scale
could not be achieved without the tremendous efforts
of the Forum’s network of over 160 Partner Institutes
in carrying out the Survey at a national level. It gathers
valuable information on a broad range of variables for
which data sources are scarce or nonexistent. For
this reason, and for the integrity of our publication and
related research, sampling and comparability across the
globe remain an essential and ongoing endeavor of The
Global Competitiveness and Benchmarking Network.

9 The completion rate is the proportion of answered questions
among the 131 questions in the survey instrument used in the
computation of the indexes.
10 In some cases, the information about the company’s sector of
activity is missing. In these cases, for any given country when the
sample includes at least one survey without sector information,
the average response values across the surveys are apportioned
to the other sectors according to the sample sizes in those other
sectors. This has the effect of including these surveys on a
one-for-one basis as they occur in the sample—that is, with no
adjustment for sector.
11 Following the computation of the sector-weighted country scores,
for each country we compute the weight of each individual
response in the sample. For any given country, if the individual
weight of a response exceeds 10 percent, we abandon the
sector-weighted approach and apply a simple average across all
responses.

NOTES
1 For Forum competitiveness publications, please see http://www.
weforum.org/content/pages/competitiveness-library.
2 For a number of countries, 2013 data were not used. Please see
the data-editing section for further details.
3 The Executive Opinion Survey 2013 is available in the following 41
languages—13 more than last year: Albanian, Arabic, Armenian,
Azeri, Bosnian, Brazilian Portuguese, Bulgarian, Burmese,
Chinese, Croatian, Czech, Danish, Estonian, English, French,
German, Greek, Hebrew, Hungarian, Italian, Japanese, Khmer,
Korean, Lao, Latvian, Lithuanian, Macedonian, Mongolian,
Montenegrin, Persian, Polish, Portuguese, Romanian, Russian,
Serbian, Slovak, Slovenian, Spanish, Turkish, Urdu, and
Vietnamese.
4 In the case of Tajikistan, the Survey was not conducted because
of a lack of clearance for its administration.
5 The World Economic Forum’s Global Competitiveness and
Benchmarking Network would like to acknowledge e-Rewards
Market Research for carrying out the Executive Opinion Survey
2013 in the United States, collecting over 670 surveys following
the detailed sampling guidelines. Furthermore, e-Rewards
supplemented a sample of 128 in Germany as well as 71 in India.
6 Company size is defined as the number of employees of the firm
in the country of the Survey respondent. The company size value
used for delineating the large and small company sample frames
varies across countries. The size value tracks closely with the
overall size of the economy. Adjustments were made to the value
based on searches in company directories and data gathered
through the administration of the Survey in past years.
7 In order to reach the required number of surveys in each country
(80 for most economies and 300 for the BRICs countries and the
United States), a Partner Institute uses the response rate from
previous years.
8 The results are the scores obtained by each economy in the
various questions of the Survey. The two terms are used
interchangeably throughout the text.

• Gross domestic product (GDP) data come from the
April 2013 edition of the International Monetary Fund
(IMF)’s World Economic Outlook (WEO) Database,
with the exception of Puerto Rico, for which figures
are sourced from Puerto Rico’s national statistics.
Reported GDP and GDP per capita are valued at
current prices.
• The chart on the upper right-hand side displays
the evolution of GDP per capita at purchasing
power parity (PPP) from 1990 through 2012 (or the
period for which data are available) for the economy
under review (blue line). The black line plots the
GDP-weighted average of GDP per capita of the
group of economies to which the economy under
review belongs. We draw on the IMF’s classification
(as used in the April 2013 edition of WEO), which
divides the world into six regions: Central and
Eastern Europe; the Commonwealth of Independent
States (CIS), which includes Georgia although it is
not a CIS member; Developing Asia, which now
includes Mongolia; the newly created Middle East,
North Africa, Afghanistan, and Pakistan region
(MENAP); Sub-Saharan Africa; and Latin America
and the Caribbean. The last group comprises
advanced economies. GDP figures come from the
WEO database. For more information regarding the
classification and the data, visit www.imf.org/weo.
Note that no data are available for Puerto Rico.

Key indicators
The first section presents a selection of key indicators for
the economy under review:

0

5

10

15

20

25

30

Percent of responses
Note:

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

100 | The Global Competitiveness Report 2013–2014

Global Competitiveness Index
This section details the economy’s performance on
the main components of the Global Competitiveness
Index (GCI). The first column shows the country’s rank
among the 148 economies, while the second column
presents the score. The percentage contribution to the
overall GCI score of each subindex score is reported
next to the subindex name. These weights vary
depending on the country’s stage of development. For
more information on the methodology of the GCI, refer
to Chapter 1.1. On the right-hand side, a chart shows
the country’s performance in the 12 pillars of the GCI
(blue line) measured against the average scores across
all the economies in the same stage of development
(black line).
The most problematic factors for doing business
This chart summarizes those factors seen by business
executives as the most problematic for doing business
in their economy. The information is drawn from the
2013 edition of the World Economic Forum’s Executive
Opinion Survey (the Survey). From a list of 16 factors,
respondents were asked to select the five most

problematic and rank them from 1 (most problematic)
to 5. The results were then tabulated and weighted
according to the ranking assigned by respondents. For
Bosnia and Herzegovina, Jordan, Oman, and the United
Arab Emirates we use data from the 2012 edition of the
Survey. See Chapter 1.3 for details.

PAGE 2
The Global Competitiveness Index in detail
This page details the country’s performance on each
of the indicators entering the composition of the GCI.
Indicators are organized by pillar. For indicators entering
at the GCI in two different pillars, only the first instance is
shown on this page.

• VALUE: This column reports the country’s score on
each of the variables that compose the GCI.
• RANK/148: This column reports the country’s
position among the 148 economies covered by
the GCI 2013–2014. The ranks of those indicators
that constitute a notable competitive advantage
are highlighted in blue bold typeface (except for
inflation). Competitive advantages are defined
as follows:
For those economies ranked in the top 10 in the
overall GCI, individual indicators ranked from 1
through 10 are considered to be advantages.
For instance, in the case of Germany—which
is ranked 4th overall—its 2nd rank on indicator
5.07 Availability of research and training services
makes this indicator a competitive advantage.
For those economies ranked from 11 through 50
in the overall GCI, variables ranked higher than
the economy’s own rank are considered to be
advantages. In the case of Iceland, ranked 31st
overall, its rank of 13 on indicator 7.10 Female
participation in labor force makes this indicator a
competitive advantage.
For those economies ranked lower than 50th
in the overall GCI, any individual indicators
with a rank of 50 or better are considered to

• INDICATOR, UNITS: This column contains the
title of each indicator and, where relevant, the units
in which it is measured—for example, “days” or
“% GDP.” Indicators that are not derived from the
Survey are identified by an asterisk (*). Indicators
derived from the Survey are always expressed
as scores on a 1–7 scale, with 7 being the most
desirable outcome.

Notes: Values are on a 1-to-7 scale unless otherwise annotated with an asterisk (*). For further details and explanation, please refer to the section “How to Read
the Country/Economy Profiles” on page 97.
The Global Competitiveness Report 2013–2014 | 101

be advantages. For the Philippines, ranked
59th overall, indicator 8.02 Affordability of
financial services, where the country ranks 31st,
constitutes a competitive advantage.
This year, two indicators derived from the Survey were
revised. The former indicator 7.07 Brain drain was split
into two indicators, namely 7.08 Country capacity to
retain talent and 7.09 Country capacity to attract talent.
The former indicator 6.04 Extent and effect of taxation
was split into two new indicators, namely 6.04 Effect
of taxation on incentives to invest and 7.05 Effect of
taxation on incentives to work. For those countries for
which we discarded the 2013 Survey data (i.e., Bosnia
and Herzegovina, Jordan, Oman, and the United Arab
Emirates), the 2012 results derived from the Survey
questions on brain drain and on the extent and effect of
taxation are used in the calculation and reported in the
country profiles.
For further analysis, the data tables in the following
section of the Report provide ranks, values, and the
period of each data point, indicator by indicator.

ONLINE DATA PORTAL
In addition to the analysis presented in this Report,
an interactive data platform can be accessed via
www.weforum.org/gcr. The platform offers a number
of analytical and visualization tools, including sortable
rankings, scatter plots, bar charts, and maps, as well
as the possibility of downloading portions of the GCI
data set.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between
1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.